ADAMS AND ORS v ALEMITE LUBREQUIP PTY LTD AND ORS [1994] NSWCA 1

ADAMS v ALEMITE LUBREQUIP PTY LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, KIRBY P and SHELLER JA 29-30 August 1994, 30 September 1994

[1994] NSWCA 1

TRUSTS — breach of — investors deposit funds with chartered accountants — premature payment to promoter who absconds — held: accountants in breach of trust — liable TRUSTS — relief — Trustee Act 1925, s85 — held: trustee's action unreasonable — relief denied CONTRACT — conditions precedent and subsequent.

TRUSTS — breach of trust — payment of moneys of investors in breach of trust — investors pay moneys into trust account of chartered accountants — chartered accountants acting as accountants and auditors for tax sheltered investment scheme — receive and controlled funds from investors — funds paid out to promoter who absconds — primary judge (Smart J) finds payment made in breach of trust to investors — on appeal — held (Gleeson CJ; Kirby P and Sheller JA concurring): (1) The accountants held the deposited funds in trust for the investors and not or not solely for the promoter; (2) Breach of trust was properly found; (3) Relief under the Trustee Act 1925, s85 was properly denied as the chartered accountants were properly found not to have acted reasonably. Trident General Insurance Co Ltd v MeNiece Bros Pty Ltd (1988) 165 CLR 107 applied.

TRUSTS — trustee — breach of trust — innocent breach — whether trustee should be relieved under Trustee Act 1925, s85 — trustee pays out large sum deposited in trust account by investors to promoter who absconds — whether breach of trust found should be excused as an honest but mistaken misapplication of trust funds — held (affirming Smart J) (Gleeson CJ; Kirby P and Sheller JA concurring): (1) The trustee had failed to act reasonably. In particular, it had failed to check if necessary consent had been given and failed adequately to check whether the rental acceleration notice required had been given; (2) Appeal dismissed.