Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd (in liquidation)

In the case of Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd (in liquidation), Blue Mirror, the plaintiff, brought an action against several defendants, including Pegasus Australia Developments Pty Ltd, the first defendant, which was in liquidation. The dispute arose from an arrangement where Blue Mirror paid approximately $9.9 million to Pegasus to be held on trust for the purpose of acquiring one million boxes of gloves for on-sale. However, it was alleged that Pegasus breached the trust by misappropriating the funds, and the second defendant caused this breach. The plaintiff sought to recover the funds or their value from the active defendants, who had received money from Pegasus after the breach.

The legal issues the court needed to decide included whether legitimate commercial agreements existed between Pegasus and the active defendants, and if these agreements were made before the breach of trust. The court also had to determine if the active defendants received the money from Pegasus with the requisite knowledge that the transfer was in breach of trust, and if they assisted in the breach. Additionally, the court examined whether the active defendants were volunteers who received money obtained by fraud and later learned of the misappropriation, potentially making them subject to the principle in Black v S Freedman.

The court concluded that the active defendants did not have legitimate commercial agreements with Pegasus prior to the breach of trust. They were found to have received the money from Pegasus knowing that the transfer was in breach of trust and assisted in the breach. Consequently, the court held that the active defendants were unjustly enriched and liable to make restitution for the misappropriated funds. The court ordered that the active defendants repay the plaintiff the full amount of the misappropriated funds or their value, as appropriate.