Supreme Court New South Wales Medium Neutral Citation: Ward v Ward (No 2) [2011] NSWSC 1292 Hearing dates: Tuesday, 18 October 2011 Decision date: 18 October 2011 Jurisdiction: Equity Division Before: Brereton J Decision: First defendant pay plaintiff the sum of $218,000. Catchwords: FIDUCIARY DUTIES - Relationship of principal and attorney under power - power of attorney gives attorney power to execute assurances and documents - power does not exonerate attorney from fiduciary obligations - attorney enters into unsecured loan agreement to fund speculative development - principal of development was the first defendant's son - nondisclosure to and potentially deception of principal - breach of fiduciary duty. Legislation Cited: (NSW) Civil Procedure Act, 2005, s 101 (NSW) Uniform Civil Procedure Rules, r 36.7 Cases Cited: Hospital Products Ltd v United States Surgical Corporation and Others (1985) 156 CLR 41 Category: Consequential orders Parties: Kenneth Charles Ward (plaintiff) Brian Charles Ward (first defendant) David Brian Ward (second defendant) Representation: Counsel: Mr D Stewart (plaintiff) Solicitors: Matthews Dooley & Gibson (plaintiff) File Number(s): 2010/93471 Judgment (ex tempore) 1HIS HONOUR: I gave judgment in these proceedings on 4 February 2011 [ Ward v Ward [2011] NSWSC 107]. At that time, I reserved for further consideration certain claims against the first defendant. 2In that judgment, I made a declaration that the first defendant held his interest in a property in Kings Park upon trust for the plaintiff. I also gave judgment against the second defendant for the amount due under the loan agreement made between the plaintiff by his attorney, the first defendant, and the second defendant. That aspect of the judgment has not been satisfied by the second defendant. The proceedings return to court today for resolution of a claim against the first defendant in relation to an alleged breach of fiduciary duty, whilst acting as the plaintiff's attorney under power, in making the loan agreement with the second defendant. 3The relationship of principal and attorney under power is a recognised class of fiduciary relationship [ Hospital Products Ltd v United States Surgical Corporation and Others (1985) 156 CLR 41, 68 (Gibbs CJ)]. Although the power of attorney under which the first defendant entered into the loan agreement was expressed to authorise the attorney "to execute an assurance or other document, or do any other act whereby a benefit is conferred on him", that is a matter of power or authority, and does not exonerate the attorney from the fiduciary obligations by which an attorney under power is bound. 4I am satisfied that by entering into an unsecured loan agreement to fund what appears to have been a speculative development venture, in which the principal appears to have been the first defendant's son, about which there was at best nondisclosure to and at worst deception of the plaintiff, the first defendant thereby acted in breach of his fiduciary obligations to the plaintiff, and is liable to account to the plaintiff for the losses thus incurred. 5The losses recoverable from the first defendant comprise so much of the loan made to the second defendant of $140,000 as is not recoverable, together with interest; however, that interest is not contractual interest under the loan agreement, but pre-judgment interest under the rules of court [see (NSW) Civil Procedure Act, 2005, s 101 and UCPR r 36.7]. As an approximation, having regard to the Reserve Bank of Australia cash rate during the period 2003 to the present date, and the pre-judgment interest rate margin of 4%, I would allow interest at the rate of 10% for eight years, a total of 80 per cent. $20,000 of the original loan was repaid in 2004. 6Accordingly, the integers are (1) the initial loan of $140,000; (2) interest of 80 per cent increases that to $252,000; and (3) a payment of $20,000 in 2004, which is seven years ago, reduces the total sum by principal of $20,000 and interest of $14,000. 7I give judgment that the first defendant pay the plaintiff the sum of $218,000. I order that recovery under the judgment against either defendant be pro tanto satisfaction of the judgment against the other defendant. I order that the first defendant pay the plaintiff's costs of the proceedings since 4 February 2011, insofar as no other costs order otherwise provides. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2011