Amir Ashrafinia v Mohammad Reza Ashrafinia; Parvaneh Karami Fakhrabadi v Mohammad Reza Ashrafinia [2013] NSWSC 1442

Supreme Court New South Wales

Medium Neutral Citation: Amir Ashrafinia v Mohammad Reza Ashrafinia; Parvaneh Karami Fakhrabadi v Mohammad Reza Ashrafinia [2013] NSWSC 1442 Hearing dates: 25, 26, 27, 28, 29 June & 2, 3, 4, 5, 6, 9 & 10 July, 8 August 2012, 14 June 2013 Decision date: 30 September 2013 Jurisdiction: Equity Division Before: Slattery J Decision: Plaintiff unsuccessful in the 2008 proceedings in establishing a joint venture for property development. In the 2011 proceedings the plaintiff establishes breaches of trust against Amir, Mohammad and Abbas and the Court will order removal of the Ashrafi Persian Trading Company Pty Ltd as Trustee of the Ashrafinia Family Investment Trust. Orders and directions made for further inquiries, for submissions as to costs, for securing payment to the Court expert, and for the appointment of a suitable new trustee. Catchwords: TRUSTS - discretionary family trust controlled by a corporate trustee - trust funds generated from a motel business run by the trustee - what are the assets of the trust - whether trust for the benefit of one of the brothers only or of the whole family - whether trust funds misapplied by family members who controlled the corporate trustee - several properties held by two brothers, directors of the trustee, in their own names were purchased and then refinanced through loans taken out by the trust - whether the brothers hold the properties on behalf of the trust - whether a food importing business run by a sister and its profits are held on constructive trust for the trust - funds paid from trust accounts to one brother and to companies controlled by him - whether some of these payments were remuneration for services rendered to the trust, loans from the trust or trust distributions - no contemporaneous trust accounts evidencing remuneration for services, loans or distributions. TRUSTS - breach of trust - Barnes v Addy knowing receipt or knowing assistance claims against the directors of the corporate trustee and third parties - whether Barnes v Addy knowledge requirements satisfied. CORPORATIONS - breach of directors' duties by the directors of the corporate -trustee - whether directors acted honestly and reasonably and should be excused from personal liability for breaches of duties under Corporations Act 2001 s 1318. PROCEDURE - limitation period - whether limitation period in relation to the pleaded breaches of trust expired - when did the relevant limitation period start running - whether limitation period in relation to the claim for constructive trust over the food business expired or whether the doctrine of laches operates. CONTRACTS - two brothers, directors of the corporate trustee, bought several properties as co-owners - whether the properties purchased with trust funds - whether the properties owned by the brothers beneficially or on behalf of the trust - whether the brothers entered into a joint venture agreement in relation to the properties - whether one of the brothers misapplied proceeds from the joint venture properties to his own benefit and should be required to refund the misapplied amounts. Legislation Cited: Conveyancing Act 1919 s 66G Corporations Act 2001 (Cth) s 1318, s 1318(1) Limitation Act 1969 s 48 Uniform Civil Procedure Rules 2005 r 31.37 Cases Cited: Barnes v Addy (1874) LR 9 Ch App 244 Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 Bell Group Ltd v Westpac Banking Corporation (No. 9) [2008] WASC 239 Briginshaw v Briginshaw (1938) 60 CLR 336 Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 277 ALR 189 [2011] NSWCA 109 Cain v Cain (2007) 13 BPR 24, 963 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 (2007) 230 CLR 89 Federal Commissioner of Taxation v Clark (1927) 40 CLR 246 Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 Hall v Poolman (2007) 65 ACSR 123; [2007] NSWSC 1330 Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462 Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90 Jones v Stores [1999] 1 WLR 1739 Lindsay Petroleum Co v Farewell & Kemp (1874) LR 5 PC 221 McLean v Burns Philp Trustee Pty Ltd (1985) 2 NSWLR 623 Meredith v Davis (1933) SR (NSW) 334 National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 Orr v Ford (1989) 167 CLR 316 Salvation Army (South Australia Property Trust) v Graham Rundle [2008] NSWCA 347 Tempest v Lord Camoys (1882) 21 Ch D 571 Walker v Melham [2007] NSWSC 264 Walters v Scarborough [2011] NSWSC 1380 Warman International Ltd v Dwyer (1995) 182 CLR 544 Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 Texts Cited: Jacobs Law of Trusts in Australia, 7th edition, J.D. Heydon and M.J Leeming, Lexis Nexis, 2006 Scott on Trusts, 4th edition, Little Brown and Company Boston, 1987 Category: Principal judgment Parties: First Plaintiff:- Amir Hossain Ashrafinia First Defendant:- Mohammad Reza Ashrafinia; Second Defendant:- Ashrafi Persian Trading Company Pty Limited