Basil Notaras v Brinos Notaras - [2012] NSWSC 947

Supreme Court

New South Wales

Medium Neutral Citation: Basil Notaras v Brinos Notaras [2012] NSWSC 947
Hearing dates: 19 July 2012
Decision date: 19 July 2012
Jurisdiction: Equity Division
Before: Rein J
Decision:
Judgment for the plaintiff.

Catchwords:
EQUITY - trusts and trustees - where s 17 Superannuation Industry (Supervision) Act 1993 (Cth) requires each member of a self-managed superannuation fund to be a trustee or director of the corporate trustee - where a trustee has breached fiduciary duties owed to the trust and breached s 52(2) of the Act - appropriate to remove that trustee and permit replacement by a corporate trustee connected with the only beneficiary having an interest in the fund, subject to approval by the Australian Taxation Office
EQUITY - trusts and trustees - where trustee breached fiduciary duty owed to the trust - trustee to account for the amount of trust proceeds withdrawn in excess of his entitlement as beneficiary
Legislation Cited: Superannuation Industry (Supervision) Act 1993 (Cth)
Trustee Act 1925
Cases Cited: Crowle Foundation v NSW Trustee and Guardian [2010] NSWSC 647
Notaras v Notaras [2011] NSWSC 546
Category: Principal judgment
Parties: Basil Theodore Notaras (Plaintiff)
Brinos Theodore Notaras (Defendant)
Representation: Counsel:
B DeBuse (Plaintiff)
No appearance by the defendant
Solicitors:
McCooe Raves & Poole (Plaintiff)
No appearance by the defendant

File Number(s): SC 2011/112756

EX TEMPORE Judgment

The plaintiff, Mr Basil Notaras ("Basil"), and the defendant, Mr Brinos Notaras ("Brinos"), are brothers and are the only two members and trustees of a self-managed superannuation fund called the Saraton Superannuation Fund ("the Fund"). By way of an amended summons filed on 28 April 2011, Basil seeks to remove Brinos as trustee of the Fund. Basil also seeks an order, in effect, that Brinos account for the proceeds of sale of certain shares which were held by the Fund and which represent part of the monies that were withdrawn by Brinos from bank accounts of the Fund ("Account 9432" and "Account 5284").

Injunctions were granted on four previous occasions to, in effect, restrain Brinos from dealing with the proceeds of sale of the aforementioned shares, from giving directions to pay those proceeds of sale to accounts other than to Accounts 9432 and 5284 or from withdrawing funds from those bank accounts.

On 23 February 2012 and on 24 May 2012 the matter was before the Court. There was no appearance by Brinos, whose solicitors had filed a notice of ceasing to act on 6 December 2011. On 24 May 2012 the matter was set down for an ex parte hearing today and in an affidavit sworn 17 July 2012, Mr J B McCooe, Basil's solicitor, deposes to the fact that he informed Brinos of this hearing date by letter and has not received any response from Brinos. The matter was called in court and outside the court this morning and Brinos did not appear.

Basil and Brinos are the only members in the Fund and both are currently trustees of it. Basil claims the following…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] NSWSC 947
Decision Date: 19 July 2012

CaseChat Overview and Summary

The case of Basil Notaras v Brinos Notaras was heard in the Federal Court of Australia. Basil Notaras, the sole beneficiary of a self-managed superannuation fund, brought a claim against his brother, Brinos Notaras, who was a trustee of the fund. Basil alleged that Brinos had breached his fiduciary duties as trustee, including failing to act in the best interests of the trust and misappropriating trust funds. Basil sought the removal of Brinos as trustee and the appointment of a new corporate trustee, connected to himself, to manage the fund.

The legal issues before the court were whether Brinos' conduct justified his removal as trustee, and whether it was appropriate to appoint a new trustee connected to Basil, the sole beneficiary. The court had to consider the requirements of section 17 of the Superannuation Industry (Supervision) Act 1993 (Cth), which mandates that each member of a self-managed superannuation fund must be either a trustee or director of the corporate trustee. Additionally, the court needed to address the implications of Brinos' breaches of fiduciary duty under common law and section 52(2) of the Act.

The court held that Brinos' breaches of fiduciary duty warranted his removal as trustee. The court noted that Brinos had acted in his own interests rather than those of the trust, misappropriating trust funds for personal use. The court found that it was appropriate to permit the appointment of a new trustee connected to Basil, as this would ensure the fund was managed in a manner consistent with Basil's interests as the sole beneficiary. The court emphasised the need for the new trustee to be approved by the Australian Taxation Office in accordance with the statutory requirements. Finally, the court ordered that Brinos account for the amount of trust proceeds withdrawn in excess of his entitlement as beneficiary.

The court's orders included the removal of Brinos as trustee, the appointment of a new trustee connected to Basil subject to ATO approval, and a requirement for Brinos to compensate the trust for the misappropriated funds.

Orders