CAUSLEY and ANOR v COUNTRYSIDE (NO 3) PTY LTD and ORS [1996] NSWCA 97

CAUSLEY and ANOR v COUNTRYSIDE (NO 3) PTY LTD and ORS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CLARKE, COLE and BEAZLEY JJA

14 August 1996, 2 September 1996

[1996] NSWCA 97

LIABILITY of beneficiaries to indemnify trustee.

Clarke JA I agree with Cole JA.

Cole JA The first respondent, Countryside (No 3) Pty Ltd claimed damages from the second respondent, Bayside Brunswick Pty Ltd (In liquidation) for breach of contract. It succeeded before Brownie J and there is no appeal from that decision. Brownie J held that the first respondent, Countryside (No 3) Pty Ltd, being a trustee under a unit trust deed dated 20 December 1993, in respect of which the appellants and others by subsequent application for units became holders of the units in the unit trust, was entitled to be indemnified by unit holders in respect of the liability for those damages incurred by the trustee in circumstances where the liabilities exceeded trust assets. Further, Brownie J held that the third respondent, McGeary Brothers Contractors Pty Ltd, itself a unit holder, was entitled to recover monies from the trustee in respect of work done by it for the trustee, and where the trust assets were insufficient to meet that liability, was entitled to indemnity from the other unit holders in respect of the trustee's unpaid liability to it.

Each of these findings has been challenged on appeal on a number of bases to which I will refer.

It is established that, absent provision in the trust deed denying the right of indemnity, or circumstances indicating good reason why a trustee should not be so indemnified, a trustee is entitled to be indemnified by the cestui que trust in respect of liabilities incurred by the trustee in pursuit of functions within power where the cestui que trust is or, if more than one, are the absolute beneficial owners of the trust property the legal title to which is vested in tee trustee.! Here cl4 of the trust deed vested beneficial ownership of the trust property in the unit holders.