Australia: Considering a joint venture? What duties will you owe your business partners?

Recent judgments from the South Australia and New South Wales Supreme Courts illustrate how the imposition by the Courts of fiduciary duties can be a double-edged sword in the joint venture context. This article provides some practical guidance for parties wishing to regulate or exclude fiduciary duties from their relationship.

Joint ventures (JV) are commercial arrangements between two or more parties to exploit a business opportunity. Key features include working towards a (usually commercial) common aim, where the parties each contribute money, property or skill1. Fiduciary duties are imposed by law. They require a party to act in the best interests of another2. The requirement to act in the interests of another can seem counterintuitive in a commercial setting – especially as a fiduciary duty may require a party to prefer another's interests to their own. Some examples of the content of fiduciary duties on individual joint venturers include obligations:

  • to avoid obtaining an advantage at the expense of, or causing disadvantage to, another joint venturer in relation to the JV project; and
  • to account for an improper advantage if obtained, irrespective of whether the improper advantage was actively hidden from the other joint venture or could have been discovered by it.

The existence of a JV agreement does not necessarily create fiduciary duties,3 and a fiduciary relationship can arise and exist independently of contract. Furthermore, recent case law from South Australia shows that an inadequately drafted JV agreement may result in a fiduciary relationship not contemplated by the parties.4

To avoid being caught unawares by the extent of their obligations to each other, prospective joint venturers should consider at the outset:

  • is the relationship to be governed exclusively by a JV agreement?;
  • what are the options for regulating fiduciary duties by a JV agreement?

Has the prospective JV given rise to a preliminary fiduciary relationship?

A fiduciary relationship may arise before the parties have executed a JV agreement, or in circumstances where the JV agreement is ultimately found to be non-binding. Therefore, the first consideration should be whether a fiduciary relationship has arisen between the parties prior to the execution of the JV agreement.

In Noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals [2017] NSWSC 502 (NET v Cyndan), the parties agreed through a series of communications how they would promote and supply certain products in the UAE. The parties agreed to agree on the precise profit-sharing arrangement at a later date. Justice Robb held that there was no binding JV agreement because an essential term – how to share profit – had not been agreed.

However, the Court found that fiduciary duties can arise between prospective joint venturers despite the fact that no JV agreement was formed. This provides some protection for prospective joint venturers who have acted against their individual best interests in pursuit of a common goal. Ultimately, in NET v Cyndan, it was held that no such duties arose because the parties had not agreed to put their collective interests ahead of their personal interests.5

Fiduciary duties: exclude, define or ignore?

Although fiduciary duties can provide some early protection for a prospective joint venturer, once a JV agreement is negotiated and formed, commercial parties usually prefer to rely upon the rights and obligations in the JV agreement. In most cases, commercial parties will prefer the predictability of the rights and obligations of a JV agreement, over the unpredictable nature of Court-imposed fiduciary duties, though particularly vulnerable joint venturers may be the exception to this position.

The existence of a JV agreement does not necessarily create fiduciary duties, and a binding JV agreement can affect the scope of associated fiduciary obligations. Whether it does so will depend upon the terms of a JV agreement.6 Two approaches to excluding fiduciary duties by a JV agreement emerge from the cases:

  1. address the issue by expressly excluding fiduciary duties in the JV agreement; or
  2. rather than expressly excluding fiduciary duties, include obligations in the JV agreement that are inconsistent with the imposition of fiduciary duties.

Option 1: expressly exclude fiduciary duties in JV agreement

This option is preferable as it increases project certainty and decreases the risk of unforeseen issues arising between the joint venturers.

The recent case of Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2017] SASC 137 is an important reminder that an inadequately drafted JV agreement may not exclude all forms of fiduciary duties, even if it seems possible that the parties did not want them to apply. In that case, the binding JV agreement contained the following clauses:

  • clause 3.6.1 stated that each party must act in the best interests of the JV; and
  • clause 10 stated that nothing in the JV agreement shall be construed to constitute any party as an agent or representative of the other, or to create any trust or commercial partnership.7

Justice Parker held that clause 10 was not wide enough to preclude the existence of all fiduciary duties, because fiduciary relationships are not limited to those involving an agent, representative, trustee or partner. In addition, as clause 3.6.1 required each joint venturer to act in the best interests of the JV, it was held that the joint venturers owed mutual fiduciary duties (in addition to the obligations arising in the JV agreement) to not exercise their property management powers to their own advantage and to the detriment of other joint venturers.8

Accordingly, parties seeking to exclude fiduciary obligations, while maintaining contractual obligations requiring each party to act in the interests of the other joint venturers, must carefully consider the drafting of the JV agreement. To increase the chances of achieving this, a JV agreement may:

  • contain obligations to co-operate and act in good faith, circumscribed to suit the parties' preferred level of involvement in each other's affairs;
  • expressly state that the contractual obligations do not create any fiduciary rights or obligations between the parties, nor any partnerships or other recognised fiduciary relationships; and
  • set up profit- and loss-sharing arrangements, while ensuring that the project is driven by a jointly constituted decision-making panel, and not by one party on behalf of another.

Option 2: create contractual obligations in the JV agreement inconsistent with fiduciary duties

If a JV agreement is well drafted, this option can have the same effect as Option 1. However, as it relies upon a favourable interpretation of often complex contracts, it is an inherently less certain exercise.

The effectiveness of drafting techniques was considered in Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323. Red Hill Iron Ltd and API Management Pty Ltd (API) were joint venturers in relation to mining tenements in the West Pilbara. A key issue in dispute was whether API owed fiduciary duties as a result of either its role as Manager of, or participant in, the JV. Beech J stated that:

"the relationship will be fiduciary to the extent, and only to the extent, that the fiduciary has agreed or undertaken to exercise powers or discretions for the principal, or, in the case of a horizontal relationship, for the parties jointly."9

Ultimately, it was held that API did not owe fiduciary obligations. This was because, while acting as Manager of the JV, API did not have discretion to determine the manner and timing of exploration under the relevant JV agreement. Although API possessed such a discretion under a separate agreement, it possessed it only as a participant who solely funded its work under that separate agreement, which also allowed it to pursue its own interests in its absolute discretion.

Consolidating the options

The cases discussed above demonstrate that retaining the freedom to act in the parties' own interests and discretion may preclude the existence of fiduciary obligations. However, it was recently held that where this freedom of discretion can be isolated to specific activities, then fiduciary obligations may continue to exist in respect of other activities contemplated by a JV agreement.[10]

Therefore, a "belts and braces" approach should be adopted if the parties intend to exclude fiduciary duties from the JV relationship.



1United Dominions Corporations Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 at 10 (Mason, Brennan and Deane JJ).

2 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41.

3 United Dominions Corporations Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 at 10–12 (Mason, Brennan and Deane JJ).

4 Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2017] SASC 137.

5 Noble Earth Technologies Pty Ltd v Hampic Pty Ltd (in liquidation) t/as Cyndan Chemicals [2017] NSWSC 502, [231].

6 United Dominions Corporations Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 at 10–11 (Mason, Brennan and Deane JJ).

7 Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2017] SASC 137 at [28] and [245] (Parker J).

8 Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2017] SASC 137 at [496] (Parker J).

9 Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 at [365] (Beech J).

10 Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2017] SASC 137 at [498] (Parker J). B

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions