Volvo (Southern Africa) (Pty) Ltd v Gert Yssel

Volvo (Southern Africa) (Pty) Ltd appointed Yssel in 2000 as manager of its information technology division. However, Yssel was not directly employed by Volvo; instead, he was employed by a labour broker (Highveld Personnel) which assigned him to Volvo. Six other IT personnel were similarly employed through various labour brokers. In 2004, Yssel arranged for all IT personnel to transfer to Highveld as their labour broker, representing to Volvo that this could be done at no extra cost and would benefit the personnel. Unbeknown to Volvo and the other personnel, Yssel had secretly arranged with Highveld to receive substantial "commissions" – approximately 40% of the fees paid by Volvo for the services of the personnel. Between August 2004 and January 2006, Volvo paid R1,967,900 to Highveld for the personnel's services (excluding Yssel), of which the personnel received R1,087,650, Highveld retained R114,143 in commission, and Yssel received R775,107. This arrangement came to light in late 2005 when Steyn discovered discrepancies between what Volvo was paying and what personnel were receiving. Yssel resigned when confronted in January 2006.

• Whether Yssel owed a fiduciary duty to Volvo despite the absence of contractual privity between them
• Whether the secret commissions received by Yssel were earned in breach of a fiduciary duty
• What circumstances give rise to a fiduciary relationship outside of established categories
• Whether fiduciary duties are limited to the express contractual functions assigned to a person

The appeal was upheld with costs, including costs of two counsel. The High Court order was set aside and replaced with an order that Yssel pay Volvo R775,107 plus interest at 15.5% per annum from 12 September 2006 to date of payment, and costs including the costs of two counsel.

A fiduciary relationship can exist in the absence of contractual privity between parties. Whether a fiduciary relationship exists depends on an assessment of all the facts, particularly whether reliance by one party upon the other was justified in the circumstances. The position occupied by a person, rather than merely the nature of the contractual relationship, can define what duties are owed. Where a person occupies a position of trust and engages in activities as an incident of that position (even if not expressly contracted to perform such activities), and the other party relies on that person believing they are acting in furtherance of their position of trust rather than for their own account, a fiduciary duty arises. A fiduciary who receives secret profits in breach of that duty must disgorge those profits regardless of whether there was contractual privity.

The court made observations about the general nature of fiduciary relationships, noting that there is no closed list of such relationships and that courts have sought to identify features or characteristics that impart fiduciary qualities to relationships, including discretion, influence, vulnerability, trust and reliance. However, the court cautioned that such references do not materially advance what was stated in Robinson v Randfontein Estates and do little more than identify factors relevant to the enquiry in particular cases. The court also observed, citing Gibbs CJ in Hospital Products Limited v United States Surgical Corporation, that it is not fruitful to attempt a general statement of circumstances in which fiduciary relationships exist, as fiduciary relations are of different types carrying different obligations, and a test appropriate for one purpose might be inappropriate for another. The court also summarized the strict rule governing fiduciary breaches as articulated in Phillips v Fieldstone Africa, noting the very limited defences available and the various factors that are irrelevant to liability once a breach is established.

This case is significant in South African fiduciary law for clarifying that: (1) contractual privity is not a prerequisite for a fiduciary relationship to exist; (2) fiduciary duties can arise from the position occupied and the trust and reliance placed by one party on another, assessed objectively from all the circumstances; (3) fiduciary duties are not necessarily confined to express contractual functions but extend to activities undertaken as an incident of the fiduciary's role; (4) the test is whether reliance by one party upon the other was justified in the circumstances; and (5) the strict rule against secret profits applies with limited defences available to the fiduciary. The case reinforces the principle from Robinson v Randfontein Estates that those in positions of confidence involving a duty to protect another's interests cannot make secret profits or place themselves in positions where their interests conflict with their duty.