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APPROPRIATION OF CORPORATE OPPORTUNITIES BY DIRECTORS AND EMPLOYEES 169

APPROPRIATION OF CORPORATE OPPORTUNITIES BY

DIRECTORS AND EMPLOYEES

Phillipsv Fieldstone (Pty) Ltd 2004 3 SA 465 (SCA); 2004 1 All SA 15 (SCA)

1 Introduction

As fiduciaries, directors have to account to their companies for "secret profits"- advantages obtained in the course and execution of their office other thanthose to which the directors are entitled by virtue of holding that office. Theyalso have an obligation not to usurp business opportunities that fall in thecompany's line of business and that they should be acquiring on its behalf,

often described as "corporate opportunities", for their own personal gain. Thecircumstances in which these two obligations arise often overlap, but there arealso clear differences between them. The distinction is important when it comes

to issues like ratification (Havenga "Corporate opportunities: a South Africanupdate" Parts I and 11 1996 SA Merc LJ 40 and 233). The fundamental dis-tinction between acquiring a corporate opportunity and making a secret profitis that in the latter instance the profit is not necessarily made at the expense ofthe company, but is obtained in some way as a result of the director's office.When a corporate opportunity is appropriated, it is deemed to be at the ex-pense of the company, but the opportunity was not necessarily acquired byvirtue of the director's position as such (eg, in IndustrialDevelopment Consul-tants Ltd v Cooley 1972 1 WLR 443, 1972 2 All ER 162 (Birmingham Assizes)the opportunity was offered to a director in his private capacity; see also Beck"The quickening of fiduciary obligation: CanadianAero Services v O'Malley"1975 CanadianBar Review

771 782and

Prentice "Regal (Hastings)vGulliver- the Canadian experience" 1967 MLR 450 453 who suggest that opportu-

nities do not come to directors in any particular capacity). There are otherdifferences. The secret profit rule extends beyond the taking of corporate op-

portunities to all kinds of fiduciary relationships, including non-commercialones (in Boardman v Phipps 1967 2 AC 46 (HL) eg , the defendants were notcompany directors, but a trustee and the solicitor to a trust). It also extends toall kinds of collateral profits, whereas corporate opportunity matters are re-stricted to the exploitation of business opportunities.

The principles underlying these two rules apply to other fiduciaries as well.In Phillips v Fieldstone (Pty) Ltd 2004 3 SA 465 (SCA); 2004 1 All SA 15(SCA) the fiduciary was an employee. The court found that when he acquired

shares in a company for which he was working on behalf of his employer in hisown name and not for the company that had employed him he had created aconflict between his own interests and his obligations to the latter company. Inthe circumstances the employee was found to be in breach of his fiduciaryobligations to the company. The decision by the supreme court of appeal isdiscussed below.

2 Phillips v Fieldstone (Pty) Ltd

2.1 The facts

Safika Wireless (Pty) Ltd ("Safika"), a subsidiary of Safika Investment Hold-ings (Pty) Ltd, was incorporated as a South African company to pursue op-

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HAVENGA

portunities in telecommunications. The second respondent in this case, Field-stone Private Capital Group ("Fieldstone Capital"), operated from New York

as a partnership. It conducted an international business, raising investment

capital and advising on activities in the infrastructure sector (described at470F as an area which includes public utilities, port and road construction

and telecommunications). It frequently worked with small enterprises whichacquired or hoped to acquire large opportunities for which they had neither the

expertise nor the ability to raise capital beyond the means of their individual

members. Fieldstone Capital often agreed to partial satisfaction of its fees inthe form of equity participation in the client or in the investment acquired bythe client. The first respondent, Fieldstone Africa (Pty) Ltd ("Fieldstone Afri-ca"), was a South African company set up by Fieldstone Capital to provide acorporate face for its activities in South Africa and to render services on itsbehalf. The plaintiff ("Phillips") had been recruited by Fieldstone Capital inthe United States because of his expertise in the field of telecommunications.

Safika sought to raise the capital required to finance the acquisition of all orpart of the ordinary shares in MTN Holdings (Pty) Ltd from SBC Commu-

nications Corporation. To this end Safika and Fieldstone Capital, represented

by Fieldstone Africa, concluded a contract in 1997 in terms of which the latter

company would render certain services in respect of the financing of the MTN

deal to Safika. If Safika acquired the shares during the term of the agreement,

Fieldstone Capital would be entitled to full payment of the agreed compensa-

tion, which consisted of a structuring fee of 1,5% of the total nominal facevalue of the financing and a placement fee of the same percentage. Phillips was

seconded to South Africa to carry out this contract, which would run for one

year or such extended period as would be negotiated by him. According to

evidence led, he was employed on a fixed salary but would receive additionalremuneration if the project was successfully executed (472F).

During the period that the Fieldstone companies were working on the con-

tract, Phillips mentioned to the managing director of Fieldstone Capital ("Ca-

pitman") that there might be an opportunity to acquire 10% of the shares inSafika. Capitman instructed Phillips to pursue the matter and to report to thecompany on the terms of the offer. Some months later when asked what pro-

gress he had made with this deal Phillips informed Capitman that Safika, whichwas a black empowerment company and wanted only black shareholders, did

not want to sell the shares to the Fieldstone companies but would sell them tohim personally. An argument arose and Capitman told Phillips that if he

acquired the shares in his personal capacity there would be a conflict of interestand he would be appropriating an opportunity of the company.

At about this time Phillips also informed Capitman that he had been invitedto become a director of Safika. Capitman agreed to this on condition that

Safika provided a letter to this effect and that any remuneration received wouldbe handed over to the company. According to normal company policy, fees soreceived would be refunded to the payee on a dollar-for-dollar basis. The

required letter was received and Phillips continued to work on the Safikaproject as well as other projects in which he was involved on behalf of Field-

stone Capital. Late in 1998 he did so without keeping the company informed ofhis whereabouts. He made contact in January 1999 and then disappeared until

the end of February when he resigned from the employment of Fieldstone

Capital.

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APPROPRIATION OF CORPORATE OPPORTUNITIES BY DIRECTORS AND EMPLOYEES 171

Safika's bid for an interest in MTN was successful and it obtained 10% ofthat company's shares. But, except for out-of-pocket expenses, Fieldstone Ca-pital was not paid for its work on behalf of Safika because, although Phillips

had ostensibly continued to work on the project until at least January 1999, hehad not ensured that the contract was extended beyond the initial one-year

period agreed upon.It gradually became apparent that Phillips had taken up a 10% share in

Safika in 1997 against payment of R732 000 and that he had proposed toSafika to bring a team to work for it. To this end, he had recruited three otheremployees of Fieldstone Capital to work for Safika. Although his appointmentas director of Safika only became official in February 1998, he had attendedboard meetings by invitation since August 1997. Around October 1999 he fellout with Safika and ceased his association with the group. During April 2000he sold his shares back to the group for R12 250 000.

The respondents instituted action against Phillips, claiming payment of the

difference between what he had paid for the shares and the price he receivedwhen selling them. They alleged that Phillips had acted as their agent in dealingwith Safika, that he owed them duties of loyalty and good faith, and that hehad breached those duties in acquiring the shares and failing to account tothem. Phillips denied any liability to account for profits, on the basis that hehad not acted as agent for the Fieldstone companies in relation to the Safikacontract. He contended that the offer of shares in Safika had been made to himin his capacity as a director of Safika and that, although it had been conveyedto both companies and had been accepted by him with their full knowledge, itdid not represent a corporate opportunity of either of the companies.

2.2 The decisionThe court of first instance found in favour of the respondents and orderedPhillips to account to them for the profits made. Leave to appeal was granted

by the supreme court of appeal after it had been refused by the trial judge. Thefindings of the trial court that were relevant to the appeal are summarized at475F-476D of the judgment of the supreme court of appeal. Briefly, they are

that no practical distinction could be drawn between Fieldstone Capital andFieldstone Africa; that even if the Safika shares had been offered to Phillips

personally and would not have been offered to the companies, it had beenPhillips's duty to secure the benefit of the investment in those shares for theFieldstone companies; by accepting the offer to acquire the Safika shares with-

out Fieldstone's knowledge and consent, Phillips had placed himself in a posi-tion where his personal interest conflicted with his duties to the respondents;the respondents' case was based not only on a breach of contractual obliga-

tions, but on a breach of a fiduciary obligation and a consequent right to adisgorgement of profits secretly earned; whether such a fiduciary duty existeddepended on the facts; and that an analysis of the relationship between the

parties, the nature of the respondents' business and the role demanded fromPhillips in promoting that business established that he indeed stood in such afiduciary relationship towards Fieldstone Capital and Fieldstone Africa. Fi-nally it was argued that the duty to acquire the Safika shares for the Fieldstonecompanies fell within the ambit of that fiduciary obligation and Phillips wastherefore liable to account to the respondents for the profits made by him.

On appeal, counsel for Phillips based their submissions on three main ques-

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HAVENGA

tions, namely whether the respondents' case was limited to a claim based onbreach of contract and not on a breach of fiduciary duty as found by the trial

court; whether a fiduciary duty attached to an employee in the position occu-

pied by Phillips; and whether or not the offer of shares to Phillips was anopportunity which properly belonged to Fieldstone Capital or Fieldstone Afri-ca and which they were able to and would have taken up. The parties agreedthat the trial court had been correct in finding that no practical distinction

could be drawn between the American and South African companies.

Although Phillips had been employed by Fieldstone Capital, he knew that

deals were concluded through Fieldstone Africa. The duties and obligations

he owed to the American entity were, at least impliedly, also owed to the South

African company (4751). In the appeal, the two respondents were therefore

treated as one entity ("Fieldstone'; 4841). The supreme court of appeal found

that the issues had been correctly decided in the lower court and dismissed the

appeal with costs.

2.2.1 The nature of the claim

The particulars of claim did not contain any specific reference to a fiduciary

obligation but the court found that this did not mean that the existence of suchan obligation could not be implied from the contract of employment that

Phillips had concluded with Fieldstone. Heher JA referred to Hodgkinson v

Simms (1994 3 SCR 377 (SCC)), where the supreme court of Canada confirmed

that the existence of a contract does not necessarily preclude the existence offiduciary duties between the parties. Rather, the legal incidents of many con-

tractual agreements are such as to give rise to a fiduciary duty (Hodgkinson

379). The relationships between trustee and beneficiary, agent and principal,solicitor and client, employee and employer, director and company and part-

ners are often used as examples (see, eg, HospitalProductsLtd v United States

SurgicalCorp 1984-1985 156 CLR 41 (High Ct of Australia)), but fiduciary

duties can arise in many other relationships. The Hodgkinson case concerned afinancial adviser. In Phillips v FieldstoneHeher JA confirmed (477H):

"There is no magic in the term 'fiduciary duty'. The existence of such a duty and its nature and

extent are questions of fact to be adduced from a thorough consideration of the substance of the

relationship and any relevant circumstances which affect the operation of that relationship."

The court took into consideration that the nature and extent of the relationship

between the parties had been argued at length in the trial court and that theappeal on the merits had not been directed at a failure to prove the existence ofa fiduciary duty, but only to what constitutes such a duty in relation to an

employee in Phillips's position (478D). The true nature of the claim was there-

fore held to be the breach of the fiduciary position he held as an employee ofFieldstone.

2.2.2 Fiduciary duties of employees

Fiduciary relationships typically arise in situations where there is some scope

for a person to exercise a discretion or power unilaterally so as to affect the

beneficiary's legal or personal interests. Often there is a certain vulnerability

involved on the part of the beneficiary (Frame v Smith 1987 2 SCR 99 (SCC)

136), although this is not a strict requirement (The Hodgkinson case 405). Some

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APPROPRIATION OF CORPORATE OPPORTUNITIES BY DIRECTORS AND EMPLOYEES 173

relationships, like those between an agent and his principal, or between adirector and his company, are always fiduciary in nature. Others, like jointventures, often involve fiduciary obligations, but this is not an inevitable con-

sequence of the relationship (News Limited v AustralianRugby FootballLeagueLimited 1996 64 FCR 410 (NSW Distr Reg)). In these instances, the facts and

circumstances of each case must be carefully scrutinized to determine whetheror not a fiduciary relationship existed, and, if so, what duties it imposed on thefiduciary, and what the scope and ambit of those duties were. When the scopeof those duties has been defined it can be ascertained whether the fiduciary hasbreached them. It is only at that stage that any question of accountability arises

(Boardmanv Phipps 1967 2 AC 46 (HL) 127). Contractual obligations are oftenalso part of the relationship between parties and they operate in addition to

whatever fiduciary duties there may be .A fiduciary relationship exists between an employer and an employee from

the moment that an employment relationship is established between them(Jones v East Rand Extension Gold Mining Co Ltd 1903 TH 325; PremierMedical& IndustrialEquipment (Pty) Ltd v Winkler 1971 3 SA 866 (W ) 867;Sappi Novoboard (Pty) Ltd v Bolleurs 1989 19 ILJ 784 786). The employee'sduty of good faith requires him to give priority at all times to the interests ofhis employer or otherwise to promote them. This implies that the employee

should act exclusively in the interests of the employer when rendering hisservices. His own interests should never be in conflict with the interests ofhis employer, for example by carrying on a business in competition with the

employer ("Labour law" by Van Jaarsveld, Fourie and Olivier in JoubertXIII. 1 LA WSA par 99). In Sappi Novoboard (787) the labour appeal courtregarded the remarks made in Regal (Hastings) Ltd v Gulliver (1942 1 All

ER 378 (HL) 386) in relation to the fiduciary duty owed by a director to hiscompany as apposite to the duty an employee owes his employer:

"The rule of equity which insists on those, who by use of a fiduciary position make a profit,

being liable to account for that profit, in no way depends on fraud, or absence of bona fides, or

upon such questions or considerations as whether the profit would or should otherwise have

gone to the plaintiff, or whether the profiteer wa s under a duty to obtain the source of the profit

for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or

whether the plaintiff ha s in fact been damaged or benefited by his action. The liability arises

from the mere fact of a profit having, in the stated circumstances, been made. The profiteer,

however honest and well-intentioned, cannot escape the risk of being called upon."

Enticement of other employees is a breach of the fiduciary obligation and mayalso amount to unlawful competition (Atlas Organic Fertilizers (Pty) Ltd v

Pikkewyn Ghwano (Pty) Ltd 1981 2 SA 173 (T)). And the employee should not

disclose confidential information or trade secrets to outsiders. What wouldconstitute confidential information depends on the circumstances of eachcase. In this regard, the potential or actual usefulness of the information to arival would be an important consideration (Coolair Ventilator Co (SA) Ltd v

Liebenbergl967 1 SA 686 (W ) 691B).In Phillips v Fieldstone the appellant was the main party, referred to in the

judgment as the "lead principal" in the Safika assignment. He was not adirector of Fieldstone, nor could he conclude contracts on their behalf. How-ever, he acted with a considerable measure of independence, reporting toFieldstone at his discretion. He was closely integrated with the client and its

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business, and the expertise which he possessed in telecommunications was no tshared by other employees or executives of Fieldstone. To that extent he wasbeyond their direction (482G). Against this background, the supreme court of

appeal had no difficulty in finding that Phillips was"at all times, covering the initial approach to him by Safika, his ow n proposal of September

1977 and the acquisition of the shares, in a position of trust in relation to the business of the

respondents which required him to place their interests above his own whenever a real possibility

of conflict arose" (482J-483A).

Some decisions indicate that less may be required of an employee than of other

fiduciaries like company directors and agents. In CanadianAero Service Ltd v

O'Malley (1974 40 DLR 3d 371 381), for example, the court indicated that

members of the "top management" of a company may have a more stringent

duty towards it than "mere employees whose duty to their employer, unlessenlarged by contract, consisted only of respect for trade secrets and for con-fidentiality of customer lists". The court warned against the "imprecise ethical

standard" that is used in American law to prohibit directors and officers from

appropriating to themselves business opportunities which in fairness should

belong to the corporation. In SA HistoricalMint (Pty) Ltd v Sutcliffe (19832 SA 84 (C)) the court expressed its doubt whether South African law wouldaccept an "imprecise ethical standard" measured by a norm as variable as the

chancellor's foot. Upon analysis of the cases the court concluded that what isprotected in both types of cases is the same sort of interest, but with acceptance

of the fact that a member of top management may more easily have been aware

of or even a party to the creation of facts aimed at benefiting the company and

that were not intended for general consumption (90H). The court confirmed

that there is no general duty burdening an employee, at whatever level, not tocompete with the company that formerly employed him (a restraint of trade

agreement may, of course, have been separately concluded). But in the process

of competing he may not "steal" the company's trade secrets or confidential

internal business information, or the energy expended in efforts, whether of

research or negotiation, made to benefit the company (91A).I mentioned above that once it has been ascertained that a fiduciary obliga-

tion exists, the scope of that obligation must then be determined. The existenceof a fiduciary relationship does not determine the content of the duties owed by

one fiduciary to another (The News Limited case 539). It is possible that there

may be circumstances that would warrant a less stringent duty being demanded

of some employees than of employees more directly involved in the company'sdecision-making, or of other fiduciaries like company directors. It is recognizedin company law that once a person accepts an appointment as a director, hebecomes a fiduciary in relation to the company and is obliged to display the

utmost good faith towards the company.and in his dealings on its behalf. The

application of this general rule to any particular incumbent of the office of

director must necessarily depend on the facts and circumstances of each case.One of the circumstances may be whether he is an executive or a non-executive

director (Howardv Herrigel1991 2 SA 660 (A) 678A-E). Similarly, the circum-

stances will determine the scope of an employee's fiduciary obligation in eachcase. But there can be little doubt that the important role played by the ap-

pellant in Phillips vFieldstone ustified the court's finding that the promotion of

the respondents' interests and the disclosure to them of such information as

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APPROPRIATION OF CORPORATE OPPORTUNITIES BY DIRECTORS AND EMPLOYEES 175

came to his knowledge which might reasonably be thought to have a bearingon their business were inherent to their relationship (483B). In both failing toinform the respondents of the offer to him or its terms, and in taking the

opportunity for himself without their consent, he succumbed to a potentialconflict of interest between his duty and his self-interest, thereby breaching

his fiduciary duty to them.

2.2.3 An opportunity which belonged to the company and its inability or

refusal to take it up

The third part of the appellant's appeal in Phillips v Fieldstone concerned

whether the share offer to him was an opportunity which "properly belonged

to the respondents" and which they "were able to and would have taken up"

(476H).A director has a duty to acquire an opportunity for his company in various

circumstances (Havenga "Corporate opportunities" 53). He couldhave a spe-cific mandate to acquire the particular opportunity, or a general mandate to

investigate or acquire specific types of opportunities. He may also not usurp anopportunity which the company is actively pursuing or an opportunity whichthe company would probably be interested in acquiring (Magnus Diamond

Mining Syndicate v MacDonald and Hawthorne 1909 ORC 65 66). In thisregard it is often said that the opportunity "belongs" to the company. The

court's suggestions (the Phillips case 482E and 483D) that

"[tihe fundamental question is not whether the appellant appropriated an opportunity belonging

to the respondents, but whether he stood in a fiduciary relationship to them when the

opportunity became available to him; if he did, it 'belonged to the respondents"' and that

"[i]ts irrelevant, on the authorities which I havecited,

that theopportunity 'properlybelonged to the company' unless this means no more than that it wa s an opportunity which

arose in the context of the appellant's fiduciary duty to the respondents and of which he wa s

required to inform them"

should be read in this context. They merely emphasize that the position inwhich the employee stood in relation to the company is the crucial factor indetermining whether or not he was able to take that opportunity for himself(South African law does not recognize the "constructive trustee" and an op-

portunity does not "belong" to a company in any stricter sense; Havenga"Fiduciary duties of company directors with specific regard to corporate op-

portunities" 1998 Tran CBL 389).Heher JA referred to various authorities that

suggestthat

it is of no rele-vance that the person or entity to whom the fiduciary duty is owed could not

have made use of the information or opportunity, or probably would not havedone so (479H-I). But on the facts he also considered it likely that some

agreement could have been reached between Phillips, Fieldstone Capital and

Safika which would have allowed the company to take up the opportunity

(483E-G). His comments in this regard should therefore be regarded as obiter.Nonetheless, they raise the interesting question whether fiduciaries in the posi-

tion of Phillips are precluded from taking all corporate opportunities, orwhether a more limited restriction applies.

Various reasons may be at the root of a company's inability to pursue anopportunity. They include restrictions in the company's constitution or sepa-rate contracts, other legal constraints, inability to finance the venture, absence

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of adequate physical facilities to make use of the opportunity, and unwilling-ness of the party offering the opportunity to deal with the company. In order to

constitute a corporate opportunity, the opportunity should not only be in the

line of business of the company, but the company should also be seen to havejustifiably been relying on the fiduciary to acquire it or to assist in its acquisi-tion for the company. This cannot be so in the case of a transaction which is

ultra vires the company. A fiduciary should therefore be able to take that

opportunity, provided that his obligation to act in the best interests of the

company is not violated (Havenga "Corporate opportunities" 236).

Where the company's inability to take up the opportunity hinges on finan-

cial factors, various views have been expressed. American law seems to have

moved from the strict approach taken in Irving Trust Co v Deutch 73 F 2d 121

(2nd Cir 1934) that financial inability is never a defence for taking a corporate

opportunity towards acceptance that the financial inability of a corporation to

take up a corporate opportunity absolves directors from liability for making

personal use of the opportunity, subject to certain restrictions which are quite

broad in their scope. The financial inability should amount to insolvency, and

the director's own lack of diligence should not have led to the corporation's

fiscal position (Havenga "Corporate opportunities" 238-239; American Law

Institute: Principles of Corporate Governance § 5.12(b); Gevurtz Corporation

Law (2000) 377-381). Most Commonwealth decisions refuse corporate inabil-

ity, or rejection of the particular opportunity by the company as a defence(Furs Ltd v Tomkies (1936) 54 CLR 583 (High Ct Australia) 592; Green and

Clara Pty Ltd v Bestobell Industries Pty Ltd 1982 WAR 1; (1982) 1 ACLA 1(Sup Ct Western Australia); Warman International Limited v Dwyer (1994-1995) CLR 544 (High Ct Australia) 558; Natural Extracts Pty Ltd v Stotter

(1997) 24 ACSR 110 (Fed Ct Australia) 138). The matter has not yet beendecided in South Africa, but I believe that the principles at the root of fiduciary

obligations suggest the answer, at least with regard to directors. Directors

should not be subjected to a temptation to refrain from exerting their strongest

efforts on behalf of the company, and they are usually handsomely compen-

sated. So a strict approach should be taken and, if a conflict of interest is found

to exist, rejection of the opportunity or the company's financial inability to

pursue it should not allow the director to do so . If there is no potential conflictof interest, for example if it is illegal for the company to take up the opportu-

nity, the director may do so because there is no breach of fiduciary obligation.

But in other instances the director should obtain the approval of the company,

after adequate disclosure, before taking up the opportunity.

Where the fiduciary is an employee the same approach should, generally, befollowed. Employees stand in a fiduciary position to the company and the

scope of that duty depends on the circumstances and position of the particular

employee. If they are such that the employee should not appropriate corporate

opportunities for personal gain, I would suggest that the same principles that

are applicable to directors would apply. Therefore the employee should dis-close the opportunity to his employer, and obtain the employer's approval to

pursue it for personal gain.

2.3 The relief

Where a director has acquired a corporate opportunity, the law refuses to give

effect to the director's intention and treats the acquisition as having been made

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APPROPRIATION OF CORPORATE OPPORTUNITIES BY DIRECTORS AND EMPLOYEES 177

on behalf of the company (African Claim and Land Co Ltd v WJ Langermann

1905 TS 494 505; Robinson v Randfontein EstatesGold Mining Co Ltd 1921 AD168 179-190 and 200). Accordingly, the company may claim property thus

acquired from the director (Magnus Diamond Mining Syndicate v MacDonaldand Hawthorne 1909 ORC 65; Robinson v Randfontein Estates 241; Cook v GC

Deeks 1916 1 AC 554 (PC)). In addition, or where such a claim is no longer

possible, for example because it has already been sold on, the company may

claim any profit made by the director as a result of his breach of duty, ordamages in respect of any loss caused to the company (Robinson; Industrial

Development Consultants 172; O'Malley 392). In appropriate circumstances aninterdict may be obtained to prohibit an impending action. The director may

be dismissed and will have no action for damages on the grounds of a breach ofcontract, if such contract exists (Havenga "Corporate opportunities" 42 and

authorities cited).In Phillips v Fieldstone the amount claimed was said to be the value of the

benefit which the respondents would have derived from the lost opportunity

rather than a simple disgorgement of profits made by him. Although the meth-

od of calculation, namely the value of the shares taken up less the price paid fo rthem, was in essence the measure of the appellant's profits, the court indicated

(478A) that a disgorgement of profits would have been a more appropriate

measure. In the circumstances, this is probably correct. But it should be borne

in mind that where a fiduciary relationship exists, it is immaterial that the

fiduciary himself may not stand to profit from the transaction he brings about

between the parties. The prohibition is not against the making of a profit

(although many cases of breach of fiduciary duty involve the wrongful acquisi-

tion of a profit, rather than the infliction of a loss) but of the avoidance of

conflict of duties (Commonwealth Bank of Australiav Smith 1991 42 FCR 390392; 102 ALR 453 477 (Fed Ct Australia); Humphris v Jenshol 160 ALR107

(Fed Ct Australia) 119). In Gemstone Corporation of Australia Ltd v Grasso

1994 13 ACSR 695 (Sup Ct South Australia) the court confirmed that there are

real differences between liability for damages in tort and the award of com-

pensation for breach of fiduciary duty in equity. In equity it is irrelevant

speculation to enquire into what might have been the outcome had the breach

of the fiduciary duty not occurred.

Had the employee in Phillipsnot already resigned, the company would alsohave been able to dismiss him.

3 Conclusion

Corporate opportunity cases often involve a fiduciary who is both a director

and an employee of the company. Phillips v Fieldstone considers the appro-

priation of a corporate opportunity by an employee who is not a director. The

decision by the court of appeal shows that the courts are willing to hold

fiduciaries accountable if they do not adhere to the strict standards inherent

to the special relationship their offices impose and sends out a warning to al lpersons who occupy a position of trust. The scope of the duties owed by afidtciary depends on his position and circumstances. It is likely that less will beexpected of an employee holding a non-managerial or inconsequential posi-

tion, than of one who is obviously relied on by the employer to obtain certain

benefits for it.

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NEELS

It is sometimes difficult to distinguish if a "secret profit" was made or if acorporate opportunity was taken, and in this case the court made no attempt todo so. It was probably not necessary here, but in some circumstances the

distinction is important (eg when ratification is an issue) and it should there-fore be kept in mind.

MICHELE HAVENGA

Unisa

TWEEVOUDIGE LEEMTE: BEVRYDENDE VERJARING EN DIE

INTERNASIONALE PRIVAATREG

Coutts & Co v Ford 1997 1 ZLR 440 (H)

Society of Lloyd's v Price; Society of Lloyd's v Lee 2005 3 SA 549 (T)

Society of Lloyd's v Romahn 2006 4 SA 23 (K)

Society of Lloyd's v Price; Society of Lloyd's v Lee 2006 5 SA 393 (HHA)

1 In die Coutts-, Price- (T) en Romahn-uitsprake kom verskeie aspekte vanbevrydende verjaring in die internasionale privaatreg ter sprake. (Sien par 16-

17 hieronder oor die Price-saak(HHA).) Die onderhawige bespreking fokus

slegs op die oplossing deur die onderskeie regters van die probleem van twee-voudige leemte in hierdie konteks. (Sien vir 'n bespreking van die Price-saak

(T) (hierna: "die Price-saak"):Forsyth 'Mind the gap': a practical example ofthe characterisation of prescription/limitation rules" 2006 Journalof Private

InternationalLaw 113.)

2 In al drie die uitsprake was die lex causae van die tersake kontrakte dieEngelse reg. (Sien oor die bepaling van die lex causae of "proper law" va n'n kontrak in die Suid-Afrikaanse internasionale privaatreg: Fredericks enNeels "The proper law of a documentary letter of credit" (deel 1) 2003 SA

Merc LJ 63.) In die Zimbabwiese uitspraak ('n beslissing van die hoogger-

egshof van Harare) is die eisoorsaak gebaseer op die kontrak self; in dieSuid-Afrikaanse uitsprake op 'n beslissing van 'n bevoegde Britse hof watweer op die onderskeie kontrakte gebaseer was. In al die gevalle was die

tersake Engelse verjaringstermyn ses jaar (a 5 en a 24(1) van die LimitationAct van 1980) en die Suid-Afrikaanse (a 11(d) van die Verjaringswet 68 van1969) of Zimbabwiese termyn (a 14 van die PrescriptionAct (Chapter 8:11))

drie jaar. (Sou die buitelandse vonnis onder a 1I(a)(ii) van die Suid-Afri-

kaanse Verjaringswet val, is die toepaslike termyn dertig jaar - sien par 3.)Die eise is ingestel meer as drie jaar maar minder as ses jaar nadat verjaring

begin loop het. Die howe het dus voor die taak gestaan om te beslis of dieEngelse of die Suid-Afrikaanse, al dan Zimbabwiese, regstelsel verjaring soubeheers.

3 In hierdie bespreking word nie ingegaan op die vraag of die vonnis van 'nbuitelandse hof onder die bepalings van artikel 1 (a)(ii) van die Verjaringswet

(dit verwys na 'n vonnisskuld" / "any judgment debt") va l nie. Die regters in

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