A win for the Obeids – Fiduciary Duties in Contractual Relationships

In some good news for the Obeid family, the NSWCA upheld an appeal by Moses Obeid and his company Streetscape Projects against the City of Sydney, avoiding any need for divine intervention (see here for the report of Mr Obeid suggesting that maps seized from his brother’s office by ICAC investigators may have been drawn by Jesus Christ).

The City of Sydney developed a ‘Smartpole’, a street pole system that allowed multiple accessories to be easily installed onto a single pole (such as streetlights, CCTV cameras and signage).  Streetscape entered into a licence agreement to exploit the Smartpole technology, with royalties payable to Sydney.

The City successfully sued Streetscape for exploiting the Smartpole technology beyond the limits of the licence agreement.  The primary judge found Streetscape had breached the agreement and went on to hold that Streetscape owed the City fiduciary duties which it breached, and that Mr Obeid was knowingly involved in that breach.

On appeal in Streetscape Projects v City of Sydney [2013] NSWCA 2 the Court rejected the imposition of a fiduciary duty.

The Court stated the following governing principles, drawing on John Alexander’s Clubs v White City Tennis Club (2010) 241 CLR 1:

  1. Fiduciary duties arise in established categories of relationships of trust and confidence (trustee and beneficiary, agent and principal, solicitor and client, etc).
  2. Circumstances outside these recognised categories may also impose an obligation for one party to act in the interests of another.
  3. Although fiduciary duties can be owed between parties to a contract, the duty must conform to the terms of the contract and must be founded in the contract.
  4. The two types of obligation — contractual and fiduciary — will, in general, co-exist only if and to the extent that the sanctions available for breach of contract (including any implied terms) are insufficient to deal with some possibility of unconscionable conduct to which one party is exposed.

Applying those principles, the appeal had to succeed.

The parties had entered into a detailed written agreement regulating their conduct.  The agreement was between arm’s length commercial parties with no relevant inequality of bargaining position.  The City’s only ‘vulnerability’ was that to which any contracting is subject – to breach by the other party.  Imposing fiduciary obligations was unwarranted and the City had to be content with contractual remedies.

A separate allegation of breach of confidence by Streetscape has been remitted to be re-heard after the primary judge erroneously disallowed pleadings and cross-examination going to the confidentiality of the Smartpole after it was in brought into the public domain.  Mr Obeid is alleged to have been involved in that breach of confidence, and so he is not off the hook yet.

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