FAI Developments P/L & Anor v Noosa Waters P/L

The case of FAI Developments P/L & Anor v. Noosa Waters P/L involved a dispute between the plaintiffs, FAI Developments P/L and Moweto Pty Ltd, and the defendants, Noosa Waters P/L, Noosa Waters Developments P/L, and Calabro Partners. The plaintiffs sought to recover sums paid by the first defendant to discharge their debts to the financier, FAI Insurance Group. The court was required to determine whether the moneys received by the financier were proceeds of sale or other disposition of property of the unit trust or other proceeds from property of the unit trust within the meaning of clause 5 of the Unitholders Agreement. The plaintiffs argued that if so, clause 6 operated to bar any claim for indemnity against them as there were no funds distributable to unitholders at the present time. The court held that the right to "accommodation" conferred upon the first defendant by the facility agreement with QIDC was trust property. The court found that funds advanced in discharge of the obligation undertaken by QIDC may reasonably be described as being the outcome or product of that obligation. The court further held that it was consistent with common usage to describe the corresponding right vested in the first defendant as being its property and therefore trust property. It seemed appropriate to describe the moneys advanced as proceeds of such property. The court held that the first defendant had a right to accommodation conferred upon it by the facility agreement with QIDC which right was trust property. Clause 2.1(a) of the QIDC facility agreement provided that the Corporation must advance drawdowns to the borrower during the availability period in accordance with the terms of this Agreement. It was submitted that moneys so advanced were proceeds of the right conferred by this clause. The court considered that funds advanced in discharge of the obligation undertaken by QIDC may reasonably be described as being the outcome or product of that obligation. Further, it was consistent with common usage to describe the corresponding right vested in the first defendant as being its property and therefore trust property. It seemed appropriate to describe the moneys advanced as proceeds of such property. The court held that the plaintiffs were not entitled to recover the sums paid by the first defendant to discharge their debts to the financier.