By Michael Crawford
Howard v Commissioner of Taxation Case Page
Why would a litigant want to be a fiduciary?
The law reports of all common law jurisdictions are replete with cases in which fiduciaries who have obtained a financial gain furiously deny that the gain constitutes an unauthorised benefit or that it was obtained in circumstances in which their duty to their principal was in conflict with their personal interest. It is somewhat of a novelty, however, to come across a case in which a fiduciary implores a court to find that he has obtained a benefit in breach of his obligations and that the fruit of his wrongdoing should thus be held on constructive trust for the benefit of his principal. Yet Howard v Commission of Taxation [2014] HCA 21 is just such a case. And why, one might ask, would a fiduciary urge upon a court such an apparently perverse submission? The answer, perhaps unsurprisingly, is tax law.
The appellant was one of six people who entered into a fiduciary joint venture, the purpose of which was to exploit the investment potential of an underperforming golf course in Victoria. The plan agreed upon was to purchase the course, find a long-term tenant to operate it and then sell the reversion to a third party for a profit. The profit realised from the sale would then be divided six ways. The benefit of this strategy was that it would yield a more or less immediate profit, referred to as a ‘day one’ profit, for the participants. Continue reading →