Kak Loui Chan versus John Zacharia, Partnership
[1984] HCA 36(Judgment by: Brennan J.(3))
Kak Loui Chan
vJohn Zacharia, Partnership
Judges:
Gibbs C.J.(1)
Murphy J.(2)
Brennan J.(3)
Deane J.(4)
Dawson (5) J.
Subject References:
Partnership
Dissolution
Assets
Partnership business conducted in leased premises
Agreement for new lease obtained by one partner before partnership affairs wound up
Whether held for benefit of partnership
Fiduciary relationship
Constructive trust
Legislative References:
Partnership Act 1891 (S.A.), - s. 38,39.
Judgment date: 7 June 1984
Canberra
Judgment by:
Brennan J.(3)
I agree with Deane J. that Dr Chan, as a former partner of Dr Zacharia, owed him a fiduciary duty in respect of the partnership property. A new lease of the Mansfield Park premises could be obtained only if the partnership's option of renewal were not exercised. Though Dr Chan was not bound to join in the exercise of that option, he could not take advantage of his refusal to secure the benefit of a renewal of the lease for the partnership in order to secure the benefit of a new lease for himself. There was a misuse of his position as a former partner to obtain a personal benefit and that, as Deane J. points out, was a breach of his fiduciary duty. Therefore I agree that Dr Chan holds the fruits of his conduct upon a constructive trust for those entitled to the property of the dissolved partnership. I would reserve for future consideration the question whether a former partner owes concurrent fiduciary duties in respect of partnership property in the course of realization - one arising from the trusteeship of the partnership property, the other arising from the relationship of former partners - which attract at once an irrebuttable presumption that the new lease was obtained by use of his position as a trustee and a rebuttable presumption that the new lease was obtained by use of his position as a former partner. As his Honour says, the facts of the case make it unnecessary to rely on either presumption, and I need say no more upon the question.
2. The appeal should be dismissed.