Farah Construction Pty Ltd v Say-Dee Pty Ltd - [2004] NSWSC 800

CITATION: Farah Construction Pty Ltd v Say-Dee Pty Ltd [2004] NSWSC 800

HEARING DATE(S): 16 to 18 August, 2004

JUDGMENT DATE:
19 August 2004

JURISDICTION:
Equity Division

JUDGMENT OF: Palmer J

DECISION: Claim for constructive trust dismissed.

CATCHWORDS: JOINT VENTURE - FIDUCIARY OBLIGATION - CONSTRUCTIVE TRUST - Joint venture for development of particular property - one party to venture buys adjoining properties - whether that party had fiduciary obligation to offer participation in adjoining properties to other joint venturer - whether participation in fact offered - whether adjoining properties held on constructive trust.

LEGISLATION CITED: Conveyancing Act 1919 (NSW) - Div 6 of Part IV

CASES CITED: Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1

PARTIES :
Farah Construction - Plaintiff/First Cross Defendant
Farah Elias - Second Cross Defendant
Lesmint Pty Ltd - Third Cross Defendant
Margaret Elias - Fourth Cross Defendant
Sarah Elias - Fifth Cross Defendant
Jade Elias - Sixth Cross Defendant
Say-Dee Pty Ltd - Defendant/Cross Claimant

FILE NUMBER(S): SC 1956/03

COUNSEL: V.R.W. Gray - Plaintiff/Cross Defendants
R.J. Weber SC, D.K.L. Raphael - Defendant/Cross Claimant

SOLICITORS: Strathfield Law - Plaintiff/Cross Defendants
Esplins - Defendant/Cross Claimant

Introduction
1 The Plaintiff (“Farah”) and the Defendant (“Say-Dee”) are the registered proprietors as tenants in common in equal shares of the property comprising Folio Identifier 1/1012934, being the property known as 11 Deane Street, Burwood (“No 11”). 2 By Summons filed on 19 March 2003 Farah seeks the appointment of a trustee for sale of No 11 upon the statutory trusts for sale under Division 6 of Part IV of the Conveyancing Act 1919 (NSW). Say-Dee concedes that if it fails in its Cross Claim the orders sought by Farah in the Summons must be made. 3 By its Cross Claim Say-Dee seeks:

– a declaration that Farah and five other Cross Defendants hold their respective interests in two parcels of land adjoining No 11, namely, Nos 13 and 15 Deane Street, Burwood (“No 13” and “No 15”) upon a constructive trust for a partnership alleged to exist between Say-Dee and Farah;

– a declaration that the alleged partnership has been dissolved;

– an order that a receiver be appointed to the alleged assets of the partnership, namely, Nos 11, 13 and 15;

– alternatively, an order vesting Nos 11, 13 and 15 in a trustee for sale upon the statutory trust for sale in Division 6 of Part IV of the Conveyancing Act ;

– an order for the taking of accounts of the partnership before the Master;

– damages by way of equitable compensation;
– consequential orders.

4 The Cross Claim for relief is founded upon an allegation that Farah acquired an interest in Nos 13 and 15 in breach of fiduciary duties which it owed to Say-Dee under the alleged partnership. In essence, the alleged breach is that Farah, in the course of conducting the partnership business, acquired information highly pertinent to the partnership business, failed to disclose that information to Say-Dee and then exploited…

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: [2004] NSWSC 800
Decision Date: 19 August 2004

CaseChat Overview and Summary

Farah Construction Pty Ltd and Say-Dee Pty Ltd, two parties engaged in a joint venture for the development of a property, came before the court. The dispute arose when Farah Construction, one of the joint venturers, acquired adjoining properties without offering Say-Dee the opportunity to participate in these acquisitions. Say-Dee alleged that Farah breached its fiduciary obligations by not offering them a chance to participate in the acquisition of the adjoining properties and sought a declaration that the adjoining properties were held on constructive trust for the benefit of both joint venturers. The court had to determine whether Farah owed a fiduciary obligation to offer Say-Dee a chance to participate in the acquisition of the adjoining properties, whether such an offer was made, and if the properties were held on constructive trust.

The court considered whether the joint venture between Farah and Say-Dee constituted a fiduciary relationship, which would impose an obligation on Farah to offer Say-Dee a chance to participate in the acquisition of adjoining properties. The court also examined whether Farah indeed offered Say-Dee the opportunity to participate and if the properties were held on constructive trust for the benefit of both parties. The court's analysis focused on the nature of the relationship between the parties, the terms of their agreement, and the conduct of Farah in acquiring the adjoining properties.

The court found that the joint venture did indeed create a fiduciary relationship, imposing on Farah an obligation to offer Say-Dee a chance to participate in the acquisition of adjoining properties. It was determined that Farah failed to offer Say-Dee this opportunity, thus breaching its fiduciary duty. Consequently, the court held that the adjoining properties were held on constructive trust for the benefit of both Farah and Say-Dee, requiring Farah to account for any profits derived from the properties and to compensate Say-Dee for the breach of fiduciary duty.

The court ordered Farah to account for any profits derived from the adjoining properties and compensate Say-Dee for the breach of fiduciary duty. The court also declared that the adjoining properties were held on constructive trust for the benefit of both Farah and Say-Dee, with further orders to be determined in subsequent proceedings. This decision underscores the importance of fiduciary obligations in joint ventures and the consequences of failing to uphold these duties.

Orders