Trimble v. Goldberg ((1906) AC 494 (PC))

Facts of the Case

The case examines the extent of a partner's fiduciary duty to share profits from a transaction conducted independently but discovered during the course of the partnership business.

• Partnership Formation (February 1902): Goldberg, Trimble, and Bennett formed a partnership with the specific and limited objective of purchasing and reselling properties owned by Mr. Hollard, including 5,500 shares in the Sigma Building Syndicate. Profits and losses were to be shared equally.

• Independent Purchase: While the partnership was ongoing, Trimble, with Bennett's involvement, independently purchased certain stands on Government Square for £110,000. Goldberg was not informed of this purchase.

• Legal Action: Goldberg sued, claiming entitlement to a share of the profits from the stand purchase.

• Lower Court Findings: Goldberg's claim that Trimble was mandated to purchase the stands for the partnership was dismissed. However, the Court of Appeal upheld Goldberg's right to share in the profits based on general partnership principles requiring good faith.

The case was appealed to the Privy Council.

Issue

Whether the independent purchase of the Government Square stands by Trimble and Bennett was a transaction within the scope of the partnership, thereby entitling the Plaintiff/Respondent (Goldberg) to share in the profits made by the Appellants (Trimble and Bennett).

Judgment

The Privy Council reversed the decision of the Court of Appeal, holding that the purchase was not within the scope of the partnership. Consequently, Trimble and Bennett were under no legal duty to account for the profits to Goldberg.

Legal Analysis

1. Defining the Scope of the Partnership

The Privy Council emphasized the limited and specific nature of the original partnership:

• Object: The partnership was formed strictly for the acquisition and resale of Hollard's properties, specifically including the Sigma Building Syndicate shares.

• The Stand Purchase: The purchase of the Government Square stands was not Hollard's property, was not an acquisition of Sigma shares, and was not part of the defined business of the partnership.

2. Application of the Fiduciary Rule (Section 16 Equivalent)

The core legal principle requires a partner to account for profits if the transaction is either: (a) within the scope of the partnership business, or (b) an undertaking in rivalry with the partnership.

• No Connection: The Privy Council found that the stand purchase was not within the scope of the partnership, not an undertaking in rivalry with it, and not connected with it in any proper sense. The fact that the purchase was a similar type of real estate speculation or that Trimble got the idea while doing partnership business was deemed insufficient.

• No Legal Duty: There was no legal duty on Trimble or Bennett to inform Goldberg of their private venture unless Goldberg had a right to take part in the speculation, which he did not, as the speculation fell outside the partnership's defined object.

3. Distinction from Cassels v. Stewart

The Court, while noting the Cassels v. Stewart case (where a partner secretly bought out a retiring partner's interest), distinguished it by suggesting that the transaction in Cassels had a closer connection with the partnership. However, for the present case, the lack of defined scope was the deciding factor. The Privy Council concluded that Goldberg's claim to share in the profits was unwarranted.

Commentary: Limits of Fiduciary Duty

Trimble v. Goldberg is an important decision that sets the limits of a partner's fiduciary duty. It makes it clear that a partner's duty to account for profits from private business only arises when:

1. The business falls within the sphere of the partnership as defined by the agreement (scope).

2. The private business actively competes with or injures the firm's existing operations (rivalry).

A partner is not a trustee of all their knowledge or business opportunities that come to their attention. If the opportunity is outside the specific business that the partners agreed to carry on, a partner is free to pursue it privately without accounting to the firm, even if the activity is of a similar nature.