Arklow vs. MacLean

In Arklow vs. MacLean and Others UKPC 51, the Privy Council London dismissed an appeal from the Court of Appeal of New Zealand which found merchant bank owed no fiduciary duty to Arklow Investments.

The Facts

Arklow Investments took business plans to Wellington Merchant bank FAR Financial 15 June 1992 seeking to borrow the $4.25m for Arklow to purchase Matakana Island.

The Arklow business plan was;

* Arklow had negotiated for $20m to purchase Matakana Island's 10,000 acres of freehold land, pine forests, sawmill and transport system
* Arklow had an agreement with Kanematsu Japan for them to purchase the 17-34 year pine forest cutting rights at a price between $13-15.75m
* That Arklow needed around $5m to complete the deal
* That the loan would be paid back from the sale of the 1-16 year forest and or other surplus assets
* That the security for the loan was the 10,000 acres of land, the 1-16 year forest, the sawmill and the transport system
* That Arklow then intended developing the 10,000 acres of land into a minimum of 16,000 houses
producing a profit of $3.43b

Instead of offering the loan funds Arklow was seeking, FAR Financial asked Arklow for $5000 to look for the money.

When Arklow declined within 30 days FAR Financial began negotiations to purchase Matakana Island for themselves offering the 17-35 year forest to ITT Rayonier for $15.6m.

The Decision

The Privy Council decision by New Zealand judge John Henry in applying Millett LJ's observation in Bristol and West Building Society vs. Mathew Ch 1, 18 that

"a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence"

and mindful of Finn's aphorism that a fiduciary

"is not subject to fiduciary obligations because he is a fiduciary"

but becomes a fiduciary because he is subject to those obligations, the Privy Council could find no evidence that an obligation of trust and confidence arose from the dealings between the appellants and the bank. As for breach of confidence, much of the information that the appellants claimed to be confidential such as the price of the island and the feasibility of the development was in the public domain. Even if confidential information was divulged to the bankers there was no evidence that they had misused it. The purchasers of the island had done their own research long before the appellants had approached the bank and had made no use of the appellants' research.

History of this Litigation

In March 1993 Arklow began a $5.5m litigation campaign against 17 defendants. The name MacLean comes from one of the directors of the defendant Far Financial.

In April 1994 Far Financial got the Wellington High Court permission to sell the 10,000 acres of land to Te Kotukutuku (TKC). TKC supported by the Ngai Te Rangi Maori tribes executive claimed the land was sacred and must never be developed.

June 1994 The New Zealand Court of Appeal overturned the validation but allowed the parties to keep their monies and asset positions until the case was heard against Far Financial.

On 5 May 1997 one month after the 4 week trial Justice Paul Temm in the Auckland High Court found in Arklow's favor. , Arklow were successful in it's claim against FAR Financial.

On 25 May Justice Paul Temm died.

Arklow then won a retrial application.

Both decisions were then appealed to the New Zealand Court of Appeal.

In July 1998 4 of the 5 judges overturned the findings of Justice Temm. In the submissions TKC had asked the Appeal Court to ignore any possible wrongs FAR Financial may have committed because the sacred land was now in the hands of the Maori people of Tauranga.

Arklow appealed the Court of Appeal judgment to the Privy Council.

In December 1999 the Privy Council judgment written by NZ judge Justice John Henry.

In 2002 Christopher Wingate the owner of Arklow Investments appeared before the Justice Electoral committee who were considering the Supreme Court Bill and it's intention to remove appeals to the Privy Council.

Committee member Russell Fairbrother MP (LLB) offered Arklow a 'Select Inquiry', but only if the terms of reference excluded any allegations of wrong against any judge or lawyer. Wingate declined.

In July 2003 Te Kotukutuku announced a large canal housing development on Matakana Island.

In July 2007 Te Kotukutuku announced it had completed sale of all of the Matakana Land to property developers.

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