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Joint Venture Agreement And Fiduciary Duties

Nevertheless, directors working on the joint venture`s boards could be exposed to debt – and are often seriously warned against such exposures by legal advisers. At least most of JV`s directors are, quite rightly, disoriented. 11 Partners in existing joint ventures for which it is not possible to include an explicit provision in the joint enterprise agreement on trust obligations should continue to seek to promote understanding among the directors of the joint venture, particularly where such tacit confirmation is made in favour of the shareholder. (return) Recent rulings by the Supreme Court of South Australia and New South Wales show how the imposition of fiduciary duties by the courts can be a double-edged sword in the joint venture. This section contains practical guidance for parties who wish to regulate or exclude fiduciary duties from their relationship. In noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals [2017] NSWSC 502 (NET/Cyndan), the parties agreed, in a series of submissions, how they would promote and supply certain products in the United Arab Emirates. The parties agreed to agree at a later date on the precise allocation of the interest. Robb J.A. stated that there was no binding agreement on the joint venture because an essential clause – how to make profit shares – had not been agreed.

Option 2: creation of contractual obligations in the joint enterprise agreement incompatible with fiduciary obligations The effectiveness of design techniques was taken into account in Red Hill Iron Ltd against API Management Pty Ltd [2012] WASC 323. Red Hill Iron Ltd and API Management Pty Ltd (API) have been joint ventures with respect to mining rental houses in West Pilbara. The central issue in the event of litigation was whether the API owed fiduciary duties because of its role as a director or participant in the joint venture. Beech J stated that joint ventures are often used as vehicles to track projects and initiatives between one or more entities. The purpose of the joint venture is sometimes to share the risks; at other times, it is to combine skillsets or resources for a common purpose. Joint ventures are not always formally documented and, where this is the case, documentation is sometimes limited to a simple statement of intent or a term sheet. More demanding players in the sector enter into complex joint venture agreements covering their rights and obligations. Regardless of the purpose of the joint venture or how it is accounted for, the question often arises as to what are the respective commitments of the partners of the joint venture and, in particular, whether the parties are bound by fiduciary obligations. When asked whether the business relationship between the parties contained fiduciary commitments, his analysis (such as that of the Court of Appeal in Adventure Golf Systems) relied on Mason J`s comments in Hospital Products on the definition of a loyalty obligation and on the need for the contract in question to take into account the fiduciary duties to be quoted with him.

Faced with the lack of a written agreement between the parties in the NSW case, he added that, in order not to be informed of the extent of their commitments in relation to each other, potential joint ventures should be considered from the outset: 6An extreme example of this approach is the creation of a single owner-led unit, in which all votes are cast directly by the owners, without a formal decision-making power being delegated to a board of directors, a committee or a management of the company.

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