Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306

Supreme Court New South Wales

Medium Neutral Citation: Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306 Hearing dates: 6-10, 14 June 2011 Decision date: 31 October 2011 Jurisdiction: Equity Division Before: Ward J Decision: Plaintiff entitled to trace into controlled moneys account to recover moneys impressed with a trust arising by reference to contractual obligation to hold and remit funds received after sale of business. First cross-claimant entitled to payment of moneys outstanding in respect of sale of business. Set-off as between respective amounts owing. Catchwords: EQUITY - TRUSTS - whether on proper construction of Sale of Business Agreement, moneys received into first defendant's trading account were impressed with an implied or resulting trust or otherwise held on constructive trust for the plaintiff - whether, if so, plaintiff entitled to trace into account in which moneys now held - whether second and third defendants liable for any shortfall in the retained moneys under the second limb of Barnes v Addy - HELD - implied or resulting trust arose on receipt of the moneys into the trading account and plaintiff able to trace into part of the funds held in the controlled moneys account - knowing assistance in dishonest breach of trust or fiduciary duty established - CONTRACT - whether breach by first defendant of warranties in Sale of Business Agreement - whether breach by plaintiff of obligation to conduct business after completion in ordinary and usual course - HELD - only breach of warranty established was in relation to preparation of company's accounts - no damages recoverable in respect of that breach as no reliance on the relevant warranty - having regard to meaning of "ordinary and usual course" of business no breach of contractual obligation by plaintiff in that regard - plaintiff entitled to set-off as against moneys owing by it to first defendant under Sale of Business Agreement the shortfall on its retained moneys claim after payment out of moneys held on trust for its benefit Legislation Cited: Commercial Agents and Private Enquiry Agents Act 2004 (NSW) Corporations Act 2001 (Cth) Partnership Act 1982 (NSW) Cases Cited: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355 Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406; (1996) 139 ALR 663 Baden Delvaux & Lecuit v Societe General pour Favoriser le Developpement [1983] BCLC 325 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 Barnes v Addy (1874) LR 9 Ch App 244 Bathurst City Council v PWC Properties Pty Limited [1998] HCA 59; (1998) 195 CLR 566 Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207; 1 All ER 155 Cook v Alto Prestige Pty Limited [2010] NSWSC 92 Countrywide Banking Corporation Ltd v Dean (1997) 8 NZCLC 261 Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371 Dering v Earl of Winchelsea (1787) 1 Cox Eq Cas 318 Devaynes v Noble; Clayton's Case (1816) 1 Mer 572; 35 ER 781 Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463 Duncan Davis Pty Ltd v Hurstbridge Abattoirs [1995] 1 VR 279 Emwest Products Pty Ltd v Olifent (1996) 22 ACSR 202 FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 Gardner v Dairy Industry Authority New South Wales (1977) 18 ALR 55; 52 ALJR 180 Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 Harkness v Partnership Pacific Ltd (1997) 41 NSWLR 204 Ibeneweka v Egbuna [1964] 1 WLR 219 Ingot and Ors v Macquarie and Ors [2004] NSWSC 1136 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 Jones v Dunkel (1959) 101 CLR 298 Liquor National Wholesale Pty Limited v Redrock Co Pty Limited [2007] NSWSC 392 Lofts v MacDonald (1974) 3 ALR 404 Meyers v Casey [1913] HCA 50; (1913) 17 CLR 90 Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 National Commercial Banking Corporation of Australia v Batty [1986] HCA 31; (1986) 160 CLR 251 Norfolk Plumbing Supplies Pty Ltd v Commonwealth Bank of Australia (1992) 6 ACSR 601 Parsons v McBain [2001] FCA 376; (2001) 109 FCR 120 Paul A Davies (Australia) Pty Ltd (in liq) v Davies [1983] 1 NSWLR 440; (1983) 1 ACLC 1091 Perkins v State Bank of South Australia (1993) 61 SASR 246 Power v Ekstein [2009] NSWSC 130 Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 102 ALR 681 Re Bradford Roofing Industries Pty Ltd (in liq) & Companies Act [1966] 1 NSWR 674 Re Cummins (t/a Nam Constructions); Ex parte Harris v ARC Engineering Pty Ltd (1985) 62 ALR 129 Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 Re Global Finance Group Pty Ltd [2002] WASC 63; (2002) 26 WAR 385 Re Goldcorp Exchange Ltd; Kensington v Liggett [1995] 1 AC 74; [1994] 2 All ER 806 Re Hallett's Estate; Knatchbull v Hallett; Cotterell v Hallett (1879) 13 Ch D 696; [1874-80] All ER Rep 793 Re Jonton Pty Ltd [1992] 2 Qd R 105; (1991) Q ConvR 54 - 392 Re Joscelyne; Allen's Plaster Products Pty Ltd v Prudential Assurance Co Ltd [1963] Tas SR 4 Re Judiciary and Navigation Acts (Advisory Opinions Case) (1921) 29 CLR 257 Re Oatway; Hertslet v Oatway [1903] 2 Ch 356 Re Sharpe; Ex parte Trustee of the Bankrupt's Property v Sharpe [1980] 1 WLR 219 Re Sabri; Ex parte Brien v Australian & New Zealand Banking Group Ltd (1996) 137 FLR 165 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422 Robertson v Grigg (1932) 47 CLR 257 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 Scott v Scott (1963) 109 CLR 649 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) [1986] 3 All ER 75 Stephenson Nominees Pty Ltd v Official Receiver (1987) 16 FCR 536 Taylor v White (1964) 110 CLR 129 Twinsectra Ltd v Yardley [2002] 2 AC 164 University of New South Wales v Moorhouse & Angus & Robertson (Publishers) Pty Ltd (1975) 133 CLR 1 West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431 Texts Cited: Halsbury's Laws of Australia (online edn) Heydon and Leeming, Jacobs' Law of Trusts in Australia (7th edn) Scott and Fratcher, The Law of Trusts (4th edn, Vol 1) Category: Principal judgment Parties: Australian Receivables Ltd (Plaintiff/First Cross-Defendant) NCO Australia Pty Ltd (Second Cross-Defendant) Tekitu Pty Ltd (First Defendant/First Cross-Claimant) Ross Edward Smith (Second Defendant/Second Cross-Claimant) Lynette Mary Smith (Third Defendant/Third Cross-Claimant) Representation: Counsel R J Brender with A Ahmad (Plaintiff/Cross-Defendants) N Cotman SC with Ms M Fisher (Defendants/Cross-Claimants) Solicitors Forbes Dowling Lawyers (Plaintiff/Cross-Defendants) Malcolm Johns and Company (Defendants/Cross-Claimants) File Number(s): 07/257468