Chan v Zacharia [1984] HCA 36

High Court of Australia Gibbs C.J. Murphy, Brennan, Deane and Dawson JJ. Chan v Zacharia [1984] HCA 36

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1984, June 7 Gibbs C.J.

The facts of this case are fully stated in the judgment of my brother Deane which I have had the advantage of reading.

There can be no doubt that if the agreement to grant Dr. Chan a lease of the partnership premises at Mansfield Park had been made before the partnership had been dissolved, Dr. Chan would have held any interest which he acquired under that agreement on a constructive trust for the partnership between himself and Dr. Zacharia. It is firmly established by a line of authorities which includes Featherstonhaugh v. Fenwick [14] , Clegg v. Fishwick [15] , Clegg v. Edmondson [1] , and In re Biss; Biss v. Biss [2] that a partner who, without the consent of his co-partner, obtains a renewal of a lease of the partnership premises in his own name, prima facie holds the lease on a constructive trust for the partnership. The expression "renewal" in this statement includes the grant of a new lease, whether or not there was a right of renewal of the lease originally held by the partners. The Court of Appeal in In re Biss; Biss v. Biss drew a distinction between two classes of cases — one (of which trustees form a notable example) whose members are absolutely incapable of retaining for themselves the benefit of a renewal, and the other (which includes partners) in which there is no more than a rebuttable presumption of fact that the person concerned is incapable of retaining that benefit. If, as the judgment of Romer L.J. [3] in that case suggests, the second class consists of persons who do not clearly occupy a fiduciary position, it is difficult to see why partners should fall within it, since, as Dixon J. said in Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd. [4] : "The relation between partners is, of course, fiduciary." However, the distinction between the two classes is well recognized in the authorities and may be drawn, not between persons who owe a fiduciary duty and those who do not, but because of the nature of the particular fiduciary duty in question. That seems to be the view of so distinguished an equity lawyer as Parker J., who, in Griffith v. Owen [5] , explained very clearly the principles involved: