This case provides some useful analysis of when a fiduciary relationship between a company and its directors who also have interests in competing businesses might be qualified so that the duty to avoid conflicts of interest won’t apply. Where the directors in this case diverted business opportunities to their competing businesses without declaring those interests (and actively concealed them), the fiduciary relationship was found not to be qualified in this way.
DTM Constructions Pty Ltd (trading as QA Developments) (QA) used a company owned by Mr Poole and Mr Hopkins to market and sell its home packages. Mr Poole and Mr Hopkins later became shareholders of QA and then a director (in the case of Mr Poole) and an officer (in the case of Mr Hopkins who became so involved in the operations of QA that he became an officer) . Mr Poole and Mr Hopkins subsequently established a number of other businesses which QA alleged entered into direct competition with QA (Competing Businesses).
QA argued that, by diverting business opportunities to the Competing Businesses, Mr Poole and Mr Hopkins breached their statutory duties under the Corporations Act 2001 (Cth) and their general law fiduciary duties owed to QA. In defending these claims, Mr Poole and Mr Hopkins argued that:
- this case fell within the principle articulated by Mason J in Hospital Products Limited v United States Surgical Corp HCA 64 that certain fiduciary relationships qualify the general law of the duty not to act in conflict of interest;
- liability as a fiduciary will not arise where the fiduciary’s actions have been authorised by the circumstances of their appointment or by the effective assent of the person to who the duty is owed (Chan v Zacharia  HCA 36); and
- the mere fact that an opportunity comes to a fiduciary in the course of that fiduciary relationship does not necessarily mean that there has been a breach of duty – it depends on the character and scope of the relationship between the parties (Streeter v Western Areas Exploration Pty Ltd No 2)  WASCA 17).
In finding that the relationship between QA and Mr Poole and Mr Hopkins was not a qualified fiduciary relationship, Justice Lyons in the Supreme Court of Queensland found that:
- the fact that it was not specifically agreed that Mr Poole and Mr Hopkins would only refer business to QA did not mean that they escaped the duty to avoid conflicts of interest by referring business opportunities to QA;
- the evidence did not show that Mr Poole and Mr Hopkins were authorised to refer business opportunities to the Competing Businesses;
- Mr Poole and Mr Hopkins did not have the effective assent of QA on the basis that Mr Ham (the nominated builder for QA) knew, or must have known, of their involvement in the Competing Businesses. In this regard, Lyons J pointed to the fact that Mr Poole and Mr Hopkins:
- did not disclose their involvement in the Competing Businesses to QA or Mr Ham; and
- actively concealed their involvement in the Competing Businesses from QA and Mr Ham (they directed staff to send emails to their new email addresses or to blind copy them) and were emailing information belonging to QA to their Competing Businesses without the consent or knowledge of Mr Ham.
On the evidence, Justice Lyons found that Mr Poole and Mr Hopkins had, in certain circumstances, breached:
- their duty under section 181 of the Act perform their duties in good faith (because they did not perform their duty to make the opportunities known to QA);
- their duties under sections 182 and 183 of the Act to avoid conflicts of interest by using their positions in QA to divert opportunities from QA to the Competing Businesses to gain an advantage and improperly using information obtained as a director/officer of QA to gain an advantage; and
- their general law fiduciary duty to avoid conflicts of interest.