Fiduciary relationship In order to determine whether there is a fiduciary relationship between Karen Matthews and Glass Real Estate

(GRE), it is necessary to identify the nature of their relationship, and define any relevant obligation pertaining to it . As Matthews relationship with GRE is not that of a presumed fiduciary, the nature of the relationship and any duties owed must be established on fact.
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Matthews was a Senior Property Manager at GRE, and therefore an integral part of business strategy and operations. Given Matthews experience and position within the company, she was privy to the inner workings of GRE and was consulted about business decisions (including potential tenders). Based on the facts as presented, it would appear Matthews position within the company exceeds the duty of fidelity, thus rendering her a fiduciary . Matthews seniority within the company meant that GRE were vulnerable to her potential misuse of confidential information . GRE was in a position of disadvantage, as they had placed reliance on Matthews to act in their best interest . Despite Matthews statement that she might take Oxley land from right under their noses, GRE would have a reasonable expectation, given her position within the company, that she would act in GREs best interests. Based on the nature of the relationship between GRE and Matthews, it can be concluded that there was a duty of loyalty owed to GRE. GRE relied on Matthews to act with undivided loyalty, and put the interests of the company above her own .
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Contractual Considerations As the fiduciary relationship between these parties is not presumed , it will be important for us to obtain a copy of Matthews employment contract to determine the scope of fiduciary duties owed to GRE by Matthews and also to exclude the possibility of an exemption clause. Wether or not the scope of Matthews duties included acting in GREs best interests to the exclusion of her own in regards to tenders for property development will depend upon the facts of the case and the specifics of this contract.
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Chan v Zacharia (1984) 154 CLR 178 Kelly v Cooper [1993] AC 205 3 Faccenda Chicken Ltd. v. Fowler et al, [1986] 1 All E.R. 617 (C.A.) 4 Sailmakers v Walker [2002] NSW 1125 5 Hospital Products Ltd v United States Surgical Corp (1984) 6 Hospital Products Ltd v United States Surgical Corp (1984) 7 Kelly v Cooper [1993] AC 205 8 Breen v Williams (1996) 186 CLR 71
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Breach of Duty As discussed, the natures of Matthews position within GRE obliged her to act in the companys best interests regarding the management of rental properties and the tendering for property developments .
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At the time that Matthews tendered for the Oxley property she was still in fact an employee of GRE, and had a duty to not place herself in a position where her interests conflicted with that of the company. By tendering for the Oxley property, Matthews placed herself in a position that involved a real conflict between her duty as a fiduciary to GRE and her personal interest. This action, made in Matthews own interest, may have constituted a breach of fiduciary duty.

Informed Consent A fiduciary cannot be held liable, however, where they have made full disclosure of a potential conflict to the principal and obtained their consent . The Director of GRE responded to Matthews statement that she might start her own development company and tender for the Oxley property with the words go ahead and try. It is therefore possible that Matthews could not be found in breach due to having given frank and full disclosure of the facts to her principal. This consideration should not be enough to discourage a claim against Matthews or her company, Oxley Terraces Pty Ltd.
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Remedies In the event that Matthews is found to have breached the fiduciary duties that she owed to GRE, a court will determine her gain as a result of the breach
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and impose a remedy accordingly. In such an

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event, the fact that GRE did not decide to tender in the Oxley property is irrelevant. Strict liability is imposed upon Karen for breaching a fiduciary duty- there is no need to show any loss . Note that GRE may claim either equitable compensation or an account of profit, not both .
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Account of profits An account of profit would direct Matthews to compensate GRE for the monetary value of what she has improperly obtained. As Karen has not yet made a profit from this breach of fiduciary duty, it will not be possible to claim this remedy. Waiting for the development to earn the projected $750,000.00 profit would likely to be sufficient delay to deny a remedy.
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Hospital Products Ltd v United States Surgical Corp (1984) Chan v Zacharia (1984) 154 CLR 178 11 Maguire v Makaronis (1997) 188 CLR 449, 466. 12 United States Surgical Corporation v Hospital Products Ltd [1983] 2 NSWLR 157 [212-213]. 13 Boardman v Phipps [1967] 2 AC 46. 14 Warman International Ltd v Dwyer (1995) 182 CLR 544. 15 Edmonds v Donovan (2005) 12 VR 513
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Equitable compensation Equitable compensation exists to place GRE in the same position that they would have been had it not been for Matthews beach of duty, and to restore GRE to the position they had been before the breach . It is unlikely that the courts will determine that GRE suffered losses as a result of Matthews breach, as the company was not intending to tender for the Oxley property.
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Alternative Remedies It is more likely, however, given that it was Matthews breach that allowed her to buy the Oxley property, she may be liable to hold it in constructive trust for GRE.
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As Matthews went to extensive

efforts to commence the project (obtaining approvals, architectural advice, development options), if a constructive trust is ordered a court will likely award (in its discretion) an allowance to reflect this undertaking.
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It is not necessary to seek an injunction against Matthews as she is no longer employed by GRE. As GRE are not seeking an injunction they cannot claim equitable damages.
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Note however that an

equitable lien may be granted to GRE over the Oxley property, despite Matthews still being the legal owner of the property .

Third Party Liability Jordan may be liable as a third party or an accessory to the breach of fiduciary duty imposed on Matthews. In Barnes V Addy
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a two-limbed approach to equitable liability has been established: the

first limb being liability for the receipt of trust property, and the second liability for knowing assistance.

The first limb would not apply in this instance, as the receipt of confidential information leading to the acquisition of land does not satisfy the first limb.
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As per the second limb, however, Jordan would be

held liable if she assisted in the acquisition of the property with knowledge that Karen was conducting herself in a fraudulent and dishonest manner. There are three elements that need to be established

before Jordan can be held liable for knowing assistance: assistance by the third party, a dishonest and fraudulent design on behalf of the fiduciary, and knowledge of the dishonest and fraudulent design.
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Nocton v Lord Ashburton [1914] AC 932 [952] Chan v Zacharia (1984) 154 CLR 178 [199]. 18 Natural Extracts Pty Ltd v Shotter (1997) 24 ACSR 110 [140] 19 Barbagallo v J & F Catelan Pty Ltd [198] 1 Qd R 245 20 Chan v Zacharia (1984) 154 CLR 178 21 (1874) LR 9 Ch App 244 22 Barnes v Abbey (1874) LR 9 Ch App 244 23 Farah Constractions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 24 Farah Constractions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 25 Farah Constractions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
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The criteria to determine third-party liability are laid out in In Consul Developments Pty Ltd v DPC Estates Ltd , and include: wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make, knowledge of the circumstances which would indicate the facts to a reasonable person and knowledge of circumstances which would put an honest and reasonable person on inquiry.
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Based on the facts it is difficult to establish what information Jordan was provided by Karen. As Established earlier, Matthews believed she was within her rights to acquire the property, however it may be possible that Jordans knowledge of Matthews relationship to GRE will be sufficient to find her liable as an accessory and as such entail an order to pay equitable compensation to GRE.

Remedies The suggested remedy is a claim for constructive trust against Oxley Terraces Pty Ltd regarding the Oxley property, as Matthews actions were in clear contravention of the fiduciary duty she owed GRE. If Matthews and/or Oxley Terraces Pty Ltd prove to be insolvent, it may be possible to claim against Jordan as a third-party.

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(1975) 132 CLR 373