In Buitendag v Ravensthorpe Nickel Operations Pty Ltd,1 the Western Australia Supreme Court gave some useful insight into the requirements for a finding that an employee has breached his or her fiduciary duty of good faith and fidelity.
Mr Buitendag was employed as general manager of a nickel mine and processing plant by Ravensthorpe Nickel Operations Pty Ltd (Ravensthorpe), a wholly owned subsidiary of BHP Biliton. Mr Buitendag had been employed by the BHP Group from 1996 until his employment was summarily terminated on 23 January 2009 for serious misconduct.
In terminating Mr Buitendag’s employment, Ravensthorpe relied on a number of breaches of his employment contract relating to Mr Buitendag having organised the donation of a transportable home belonging to Ravensthorpe to a clay target shooting club he was helping to establish. Although Mr Buitendag had disclosed some of the details of his interest in this transaction, he failed to provide full disclosure.
Mr Buitendag pursued a claim for wrongful dismissal and for damages on the basis of his lost entitlements.
Justice Le Miere, of the Supreme Court held that Mr Buitendag had breached his contract of employment and that the breach had been so serious as to justify summary dismissal. Whether Ravensthorpe had afforded Mr Buitendag procedural fairness in dismissing him was irrelevant.
Justice Le Miere considered what would constitute a breach of the fiduciary duty of good faith and fidelity owed by an employee to an employer and found that it would involve an issue with the employment relationship “in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employer is reasonably entitled to have in its employee”.
In making this comment, the Court emphasised that only certain functions performed by Mr Buitendag in the course of his employment would give rise to a fiduciary duty. Taking action or making a decision which involves the employee exercising their own discretion, may give rise to a fiduciary duty.
This fiduciary duty would be breached if, when making a decision or performing a function that involves the exercise of discretion, the employee puts themself into a position where their interest or duty to a third party, conflicts with the interests of, or the employee’s duty to, their employer. In this case, Mr Buitendag’s personal interest in the clay target shooting club gave rise to such a conflict.
Therefore, given the circumstances, the donation of the transportable home to the club was a potential breach of Mr Buitendag’s fiduciary duties. Mr Buitendag could only have avoided a breach of his fiduciary duties, particularly the duty of good faith, by making full and frank disclosure of this interest, which he had not done.
The Court went on to say that when an employee’s conduct is such that an employer can no longer have trust and confidence in them, to hold and execute the functions of their position in accordance with their employment contract, then the employer may be justified in terminating the contract.
Mr Buitendag’s breaches of his fiduciary duties were held to have destroyed Ravensthorpe’s trust and confidence in his ability to carry out the duties of his position and his failure to sufficiently disclose the conflict of interest gave grounds for summary dismissal. As such, Mr Buitendag’s claim was dismissed.
Bottom line for employers
Determining whether an employee has breached his or her fiduciary duties will never be clear cut for employers. There is more likely to be a breach where the employee is in a senior position and holds a position of trust and confidence within the company.
Key factors identified in this case were whether the employee was required to exercise his own discretion, and whether he made full and frank disclosure of his personal interest in the transaction. If an employee can reasonably and genuinely no longer be trusted by the employer to carry out the duties in his or her employment contract because of the act in question, then there is likely to have been a breach of the duty of good faith and fidelity.