Galati v Deans

[2023] NSWCA 13

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Galati v Deans & Ors [2023] NSWCA 13

Hearing dates:

20 September 2022; written submissions 27 and 29 September 2022

Decision date:

15 February 2023

Before:

Macfarlan JA at [1];
White JA at [2];
Basten AJA at [108]

Decision:

(1) Appeal allowed in part.

(2) Set aside order (1) made on 1 September 2021 in the court below.

(3) In lieu thereof,

(a) Declare that the third respondent holds the shares in the fourth respondent on trust for the appellant and the second respondent as tenants in common in equal shares;

(b) Otherwise dismiss the appellant’s claim.

(4) Order that within 28 days the parties file and exchange written submissions of no more than 8 pages as to the appropriate costs orders to be made in respect of the proceedings below and of the appeal.

Catchwords:

EQUITY – trusts – resulting trusts – constructive trusts – characterisation of trusts – where appellant and respondents engaged in joint venture in hope of redevelopment of Sydney Fish Market – where in the course of the joint venture companies controlled by appellant and first respondent acquired call option for the acquisition of shares in an unrelated company – where nominee company appointed to exercise call option on behalf of grantees – where grantees provided finance for nominee company to exercise call option – whether evidence established that grantees intended nominee company to hold acquired shares on trust for them in equal shares – whether such trust is properly characterised as a presumed resulting trust or a common intention constructive trust – whether parties intended that trust over shares should only arise upon allocation of units to appellant in nominee company’s unit trust – held that nominee company holds half of its shares acquired under call option deed on trust for appellant

EQUITY – fiduciary duties – secret commissions – entitlement of company related to joint venturer to commission under antecedent agency agreement – commission retained in its entirety by joint venturer’s company upon receipt – whether receipt of commission amounts to breach of fiduciary duty – whether liability of other joint venturer for breach of fiduciary duty ought to be reduced by amount of commission said to be wrongfully received and retained – no breach of fiduciary duty established in circumstances where antecedent agency agreement unconnected with joint venture

Cases Cited:

Austin v Keele (1987) 10 NSWLR 283

Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59

Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336

Bosanac v Commissioner of Taxation [2022] HCA 34

Calverley v Green (1984) 155 CLR 242 at 246; [1984] HCA 81

Carantinos v Magafas [2008] NSWCA 304

Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; [1956] HCA 28

Dewhirst v Edwards [1983] 1 NSWLR 34

Grant v Edwards [1986] Ch 638; 2 All ER 426

Green v Green (1989) 17 NSWLR 343

Maharaj v Chand [1986] AC 898; 3 All ER 107

Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78

Parsons v McBain [2001] FCA 376; 109 FCR 120

Shepherd v Doolan & Ors; Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42

Category:

Principal judgment

Parties:

Dominic Gerardo Galati (Appellant)
Robert Paton Deans (First Respondent)
Fishbank Development Corporation Pty Limited (Second Respondent)
TRHS Pty Ltd (Third Respondent)
Felan’s Fisheries Pty Ltd (Fourth Respondent)
Trading Australia Pty Ltd (in liq) (Fifth Respondent)

Representation:

Counsel:
P Herzfeld SC with G Drew (Appellant)
G K Burton SC with P Barham (First to Fourth Respondents)

Solicitors:
Harris Friedman Lawyers (Appellant)
FCB Workplace Law (First to Fourth Respondents)

File Number(s):

2021/264875

 Decision under appeal 

Court or tribunal:

Supreme Court of NSW

Jurisdiction:

Equity General

Citation:

Galati v Deans [2021] NSWSC 1094

Date of Decision:

01 September 2021

Before:

Ward CJ in Eq

File Number(s):

2016/360462

HEADNOTE

[This headnote is not to be read as part of the judgment]

In or around 2014, the appellant, Mr Dominic Galati, and the first respondent, Mr Robert Deans, embarked on a joint venture to redevelop certain lands in Blackwattle Bay (including the land upon which the Sydney Fish Markets are situated). That joint venture was carried on by a company controlled by Mr Galati, Trading Australia Pty Ltd (“TA”), and a company controlled by Mr Deans, Fishbank Development Corporation Pty Ltd (“Fishbank”). From around 2002, Mr Deans had been exploring opportunities for such redevelopment, having procured an agency agreement with a company, Bidvest Australia Pty Ltd (“Bidvest”), owing land adjoining and shares in the Sydney Fish Markets.

As part of the joint venturers’ plans to redevelop (and profit from) the selected sites, a plan was made to acquire and on-sell land adjoining the Sydney Fish Markets, and to obtain shares in a company, Felan’s Fisheries Pty Ltd (“Felan’s Fisheries”), that had an indirect shareholding in the corporate lessee of the Sydney Fish Markets. Having insufficient funds themselves, the joint venturers contracted with a third party, Dahua Group Pty Ltd (“Dahua Group”). Dahua Group incorporated two special purpose vehicles to acquire the Bidvest land and shares in Felan’s Fisheries, and granted call options to TA and Fishbank for the acquisition of each at a fixed price, in addition to costs and interest. TA and Fishbank subsequently found a purchaser interested in the land, but not the shares. The joint venturers agreed to acquire the shares through a nominee company, TRHS Pty Ltd (“TRHS”), to hold in its capacity as trustee of a unit trust, for the purposes of the joint venture. The price the purchaser paid for the land was more than was needed for the price payable under the option granted by Dahua Group and the surplus was more than sufficient to pay the price payable under the option to acquire the shares in Felan’s Fisheries.

Before TA could be allocated units in the unit trust, Mr Galati had a falling out with Mr Deans. Mr Galati and TA subsequently instituted proceedings, seeking, among other things, a declaration that TRHS held 50% of its shareholding in Felan’s Fisheries on trust for TA as a tenant in common in equal shares with Fishbank. TA’s claim was continued after its liquidation by Mr Galati, as the assignee of its right to sue the respondents in respect of the shares.

The primary judge (Ward CJ in Eq) dismissed Mr Galati’s and TA’s claims to entitlement to half of TRHS’ shares in Felan’s Fisheries, and upheld a cross-claim by which Mr Deans and Fishbank asserted that Mr Galati and TA were liable to account to them for secret commissions wrongfully received and retained during the joint venture. The primary judge awarded a sum of $899,910.48 against the appellant, either as damages for the tort of deceit, for which an additional sum of $100,000 as exemplary damages was imposed, or as equitable compensation.

On appeal, the issues before the Court were:

1. Whether the primary judge had erred in refusing to declare that TRHS holds 50% of its shares in Felan’s Fisheries on trust for Mr Galati, whether in his own right or as the assignee of TA, as a tenant in common with Fishbank;

2. Whether the primary judge had erred in failing to find that Mr Deans, by reason of his company’s antecedent agency agreement with Bidvest, had received a secret commission in breach of his fiduciary duty to the joint venture; and

3. If Mr Deans had so breached his fiduciary duty, the appellant’s quantum of damages for the tort of deceit, or equitable compensation, should be reduced by the commission received from Bidvest.

The Court (Macfarlan JA, White JA and Basten AJA), allowing the appeal in part, held:

As to issue (i) per Macfarlan JA and Basten AJA

1. The primary judge had erred in refusing to declare a trust over TRHS’s shares in Felan’s Fisheries in favour of Mr Galati, but not on the basis that any such trust was express or constructive in nature. Instead, the evidence established that, in circumstances where TRHS has been appointed as nominee for the exercise of the call option without consideration, and the substratum of TA and Fishbank’s commercial relationship had then failed, a presumed resulting trust attached to TRHS’s shares: [1] (Macfarlan JA), [134]-[147] (Basten AJA).

Wirth v Wirth (1956) 98 CLR 228; [1956] HCA 71; Napier v Public Trustee (WA) (1980) 55 ALJR 1, applied.

Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78; Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59, cited.

1. The primary judge’s findings as to a lack of common intention referable to the beneficial enjoyment of property evinced no error for appellate intervention. Moreover, there is some doubt, arising from the necessity to prove detrimental reliance in cases of proprietary estoppel and common intention constructive trusts alike, as to whether a finding of a common intention constructive trust can be made where a claim for proprietary estoppel is rejected: [1] (Macfarlan JA), [148]-[149] (Basten AJA).

Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42; Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336; Koprivnjak v Koprivnjak [2023] NSWCA 2, discussed.

Grant v Edwards [1986] Ch 683; Green v Green (1989) 17 NSWLR 343; Bassett v Cameron [2021] NSWSC 207, cited.

As to issue (i) per White JA:

1. The evidence establishing that TA and Fishbank had advanced moneys to TRHS for the acquisition of shares under the call option by way of loan, rather than as direct payment for the acquisition of the shares, was sufficient to negative the presumption of a resulting trust in the circumstances: [51]-[52] (White JA).

Calverley v Green (1984) 155 CLR 242; [1984] HCA 81, applied.

Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; [1956] HCA 28, cited.

1. The primary judge had erred in finding that TRHS did not hold 50% of its shares in Felan’s Fisheries on trust for Mr Galati, as the assignee of TA’s rights. The character of that trust was not, as Mr Galati had initially contended, express, but rather a common intention constructive trust, generated from TA and Fishbank’s shared intention that TRHS (as their nominee) should hold the shares beneficially for the purposes of the joint venture: [48]-[56], [73]-[78] (White JA).

Grant v Edwards [1986] Ch 638; Maharaj v Chand [1986] AC 898; Austin v Keele (1987) 10 NSWLR 283; Green v Green (1989) 17 NSWLR 343; Shepherd v Doolan & Ors; Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42, considered.

Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78; Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59; Bosanac v Commissioner of Taxation [2022] HCA 34, cited.

1. Though there is a resemblance between a common intention constructive trust and proprietary estoppel it had not been submitted that, in Australian law, the latter has subsumed the former. Existing authority was to the contrary. Although the appellant did not challenge the primary judge’s rejection of his claim for equitable or conventional estoppel, this is not a matter that need be decided: [57]-[61] (White JA).

Austin v Keele (1987) 10 NSWLR 283; Green v Green (1989) 17 NSWLR 343; Parsons v McBain [2001] FCA 376; 109 FCR 120; Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336, considered.

As to issue (ii)

1. There was no error in the primary judge’s conclusion that Mr Deans had not breached any fiduciary duty owed to the joint venture by virtue of receipt and retention of a commission made pursuant to his company’s agency agreement with Bidvest. Quite aside from the fact that the commission was paid to a company related to Mr Deans, rather than Mr Deans himself, the agency agreement was antecedent to, and unconnected with, the joint venture: [1] (Macfarlan JA), [96]-[105] (White JA), [152] (Basten AJA).

As to issue (iii)

1. Given that Mr Deans was not liable for breach of fiduciary duty, the challenge to the primary judge’s assessment of the quantum of damages or equitable compensation payable by Mr Galati did not arise: [1] (Macfarlan JA), [17] (White JA), [152] (Basten AJA).

JUDGMENT

1. MACFARLAN JA: I agree with the orders proposed by White JA.  Although Mr Galati’s entitlement to a 50% interest in the shareholding in Felan’s Fisheries may arguably be founded on a common intention constructive trust, for the reasons given by Basten AJA in [149] I prefer the conclusion that it arises out of a resulting trust.  I accordingly agree with his Honour’s reasons for judgment.

2. WHITE JA: This is an appeal from orders of the Equity Division (Ward CJ in Eq). The appellant, Mr Dominic Galati, was the sole director and shareholder of Trading Australia Pty Ltd (“TA”), a company now in liquidation. The first respondent, Mr Robert Deans, is the sole director and shareholder of the second respondent, Fishbank Development Corporation Pty Ltd (“Fishbank”), and holds all the shares in the third respondent, TRHS Pty Ltd (“TRHS”).

3. TRHS holds all of the shares in the fourth respondent, Felan’s Fisheries Pty Ltd (“Felan’s Fisheries”). Felan’s Fisheries holds 25% of the shares in SFM Tenants and Merchants Pty Ltd (“Tenants and Merchants”) which in turn holds 50% of the shares in Sydney Fish Markets Pty Ltd, the lessee of the Sydney Fish Markets.

4. TA originally joined with Mr Galati as co-plaintiffs. During the course of the proceedings below, TA went into liquidation. Mr Galati has taken an assignment from the liquidator of TA of TA’s rights that Mr Galati sought to assert in the proceedings.

5. Amongst other claims, Mr Galati and TA sought a declaration that TRHS held the shares in Felan’s Fisheries on trust as to 50% for TA or Mr Galati. Alternatively, they sought a declaration that Mr Deans held the shares in TRHS on trust as to 50% for himself and 50% for Galati.

6. The primary judge rejected those claims (Galati v Deans [2021] NSWSC 1094). On appeal, Mr Galati contends that the primary judge erred in rejecting the claim. Mr Galati seeks a declaration that TRHS holds the shares in Felan’s Fisheries shares as to 50% for Mr Galati and 50% for Fishbank.

7. The shares in Felan’s Fisheries were originally held by a company called Bidvest Australia Pty Ltd (“Bidvest”). A related company of Bidvest’s, Stevenson and Co Pty Ltd, owned land adjoining the Fish Market. This land was referred to as the Bidvest Site. Mr Deans was a real estate agent. On 2 July 2002 Bidvest entered into an agency agreement with Mr Deans’ company, Deans Property Pty Ltd, for payment of commission if it effectively introduced to Bidvest a purchaser for the Bidvest Site during the “Continuing Agency Period” and if the purchaser subsequently entered into a binding contract.

8. The primary judge found that from in or around 2014 Mr Galati and Mr Deans engaged in a joint venture to identify and liaise with particular funders of or investors in a project that Mr Deans contended was his conception for the redevelopment of the Sydney Fish Markets and adjoining and nearby lands in Blackwattle Bay. These included the Bidvest site (at [12]-[14]; [572], [576], [581]-[582].

9. Either on 22 April 2015 or 7 June 2015, (at [104]) Mr Galati and Mr Deans signed a document called “Agreement Principles” which stated that Mr Deans would be responsible for project design of a redeveloped fish market and would manage the architectural process and Mr Galati would arrange finance for the deal, would be involved in “strategic and tactical management” and would manage the political process.

10. The primary judge summarised the financial arrangements appearing in that document as follows:

“[109]   Broadly, therefore, what was provided for under the Agreement Principles document meant that the return to each of Mr Deans and Mr Galati was to depend on the amount funded: for any amount received of under $100 million, the proportionate split was 70%/30%; and above $150 million, the split was equal. Relevantly, there is nothing in the document as to the Felan’s Fisheries shares. (Nor, significantly in my opinion, is there anything about an agreed $1.2 million success fee.) The best case scenario seemed to involve the receipt by Mr Deans of $10 million and by Mr Galati of $5 million at the commencement of the project (it being conceded that $5 was likely a typographical error and that it was meant to be $5 million).”

11. Mr Deans and Fishbank filed a cross claim in which they sought, amongst other relief, damages or equitable compensation from Mr Galati and TA in respect of Mr Galati’s dealing with moneys from an ultimate buyer of the Bidvest Site, EJC Pyrmont Pty Ltd (“EJC”) which they characterised as the receipt of a secret commission. The secret commission was received by TA on 9 December, having been paid by EJC to an agent, a Ms Pritchard, on 8 December 2015 (at [333]).

12. The primary judge found that each participant in the joint venture was under a fiduciary duty to refrain from pursuing, obtaining or retaining for itself or himself any collateral advantage in relation to the proposed project without the knowledge and informed assent of the other participants (at [821]). Her Honour found that the payment of $1,799,820.95 by EJC was a secret commission and that the payment was made to TA on behalf of, and thus as an agent of, the joint venturers (at [822]). The receipt was concealed from Mr Deans. The primary judge found that Mr Galati was liable to pay half that sum to Fishbank, either as damages at law for the tort of deceit, or as equitable compensation (at [930(1)]).

13. Her Honour found that Mr Galati was also liable to pay $100,000 to Fishbank as exemplary damages for the tort of deceit.

14. Mr Galati challenged the quantum of the award of damages or equitable compensation. He did not challenge the finding that he received and retained moneys in breach of his fiduciary obligations. Mr Galati had claimed unsuccessfully that much of the money received was used to pay the debts of Fishbank. The primary judge was not satisfied that the payments Mr Galati identified discharged any obligations that, as between Fishbank and TA or Mr Deans and Mr Galati, were the responsibility of Fishbank (at [829]). A ground of appeal that alleged that $822,000 of the $1,799,820.95 received was used to pay Project creditors was not pressed.

15. A ground which was pressed as a partial answer to the obligation to account, or the award of damages for deceit, was that prior to November 2015 Mr Deans had allegedly taken a secret commission of $550,000 during the period in which he was found to have fiduciary duties to Mr Galati. It was submitted that half of that sum needed to be brought into account to reduce the amount of equitable compensation by $275,000.

16. The same ground was relied upon to challenge the award of exemplary damages. Mr Galati accepted that in order to disturb that award, he needed to demonstrate House v King error. In oral submissions, counsel for Mr Galati accepted that that could only be done if he succeeded in his contention that the primary judge gave insufficient emphasis to Mr Deans’ allegedly making a secret commission on an earlier transaction. Counsel submitted that if it were established that Mr Deans had himself made a secret commission, this would mean that the primary judge’s discretion miscarried and would need to be re-exercised. Counsel submitted that the primary judge ought to have treated the case as one in which there was a fractious relationship and breaches of fiduciary duty on both sides, Mr Galati acted in accordance with his notion of right and justice and hence it was not an appropriate case for an award of exemplary damages.

17. The questions arising on the appeal are

1. Whether the primary judge erred in refusing to declare that TRHS holds its shares in Felan’s Fisheries on trust for TA (now Mr Galati as TA’s assignee) as to a 50% interest as tenant in common with Fishbank;

2. Whether the primary judge ought to have found that Mr Deans was liable to account to TA or Mr Galati for commission paid by Bidvest to Mr Deans’ company as the result of the sale of the Bidvest Site referred to below; and

1. If so, whether the question of equitable compensation or damages awarded against Mr Galati should be reduced by $275,000 and the award of exemplary damages should be set aside.

18. For the reasons which follow, I would answer question 1, yes. I would answer question 2, no. Question 3 does not arise.

Further Background

19. On 19 December 2014 Bidvest entered into agreements for the sale of Bidvest’s shares in Felan’s fisheries and for the sale of the Bidvest Site. The primary judge observed that Mr Galati claimed credit for identifying a Chinese investment or property company called Dahua Group Fish Market Project Pty Ltd (“Dahua Group”) as a proposed investor and purchaser of the Bidvest site.

20. On 18 November 2014 Mr Deans for Deans Property and a Mr Berson for Bidvest signed a letter which provided as follows:

“Dear Bernard,

RE: Amendment to the Agency Agreement for the Sale of 31-35 Bank Street, Pyrmont

Further to the annexed Sales Inspection Report and Exclusive Agency Agreement (and Continuing Agency) dated 2nd July 2002, Deans Property agrees to the following:

1.    That pursuant to Clause 2 i) of the annexed agreement that the Exclusive Selling period is now expired and that Clause 4 i) now establishes the Continuing Agency Period now applies.

2.    That pursuant to Clause 3 and including 'the attached' document titled "Commission Fee for Service" of the annexed agreement, Deans Property Pty Limited (AGENT) agree to amend the "Commission Fee for Service" to $500,000 plus GST, only if the sale of the property and business to Dahua is completed by the end of April 2015 for a minimum total consideration of $18m.”

21. It can be inferred from the call option deeds referred to below that on 19 December 2014 two special purpose vehicles, Dahua No 1 Pty Ltd (“Dahua No 1”) and Dahua No 2 Pty Ltd (“Dahua No 2”) entered into agreements for the purchase of the Bidvest Site (by Dahua No 1) and Bidvest’s shares in Felan’s Fisheries (by Dahua No 2).

22. Dahua Group entered into two call option deeds both dated 19 December 2014. One deed provided for the grant of a call option by Dahua Group to TA and to Fishbank (together “the Grantee”) for them to acquire all of the shares that were held by Dahua Group in Dahua No 1. The other provided for the grant of a call option by Dahua Group to TA and Fishbank to acquire Dahua Group’s shares in Dahua No 2. The call options were interdependent (cl 3.7). The call option fee was $1. The call options could be exercised by the giving of written notice and delivery of a share sale deed in a form annexed to each option deed. The call options could be exercised within six months, after which they would automatically expire.

23. If the options were exercised the price payable under the share sale deed would, in the case of the purchase of shares in Dahua No 1, be the purchase price payable under the contract for sale of the Bidvest Site, plus stamp duty or legal costs and with interest to be computed from the date of the settlement of the purchase of the Bidvest Site (by Dahua No 1) until the date of settlement under the share sale deed (cl 3.6).

24. In the case of the option to acquire the shares in Dahua No 2, the call option could be exercised by the delivery of written notice and of a share sale deed in the annexed form, with the purchase price payable under the share sale deed on exercise of the call option to be the aggregate of the purchase price payable under the Felan’s sale deed (being a share sale deed dated 19 December 2014 between Bidvest and Dahua No 2 and others), stamp duty or legal costs and interest at the rate of 8% from the date of settlement of the purchase of the Felan’s sale deed.

25. It was agreed on the pleadings that the purchase of the “Bidvest Assets” (being the Bidvest Site and the shares in Felan’s Fisheries) was completed by Dahua in or about early 2015. The primary judge found that the purchase was completed in March to April, 2015.

26. It appears that Fishbank and TA exercised the call options and entered into share sale deeds dated 19 June 2015 which were due for completion on 21 July 2015. On 28 July 2015 solicitors for Dahua Group, Dahua No 1 and Dahua No 2 gave notice of termination of the share sale deeds. On 31 July 2015 Fishbank and TA commenced proceedings in the Equity Division seeking orders restraining Dahua Group, Dahua No 1 and Dahua No 2 from taking any steps to act on the purported termination of those deeds.

27. Those proceedings were settled when the parties agreed to enter into new call options on 24 September 2015. On 24 September 2015 the parties entered into deeds of rescission of the earlier call option deeds and share sale deeds. On the same day they entered into new call options, one for the Bidvest Site and one for the shares in Felan’s Fisheries. They also executed a deed of settlement and release.

28. The new call options were not for the purchase of Dahua Group’s shares in Dahua No 1 and Dahua No 2 but were options granted by Dahua No 1 for the purchase of the Bidvest Site and by Dahua No 2 for the purchase of the shares in Felan’s Fisheries. The options could also be exercised by a nominee of Fishbank and TA. If the option for the purchase of the Bidvest Site were exercised, the Grantee or the Grantee’s nominee became bound by the terms of a contract for the sale and purchase of the Bidvest Site for a price of $20,957,683.46. The option expired at 5.00pm on 20 November 2015.

29. The call option for the purchase of the shares in Felan’s Fisheries provided:

“Grant and lapse of Option

1.   Subject to clause 4, in consideration of the payment by Trading Australia Pty Ltd (ACN 095 923 407) ("TA") and Fishbank Development Corporation Ply Limited (ACN 087 155 315} ("FDC") (together, the "Buyer"), to the Seller of the option fee of $1 (excluding GST) ("Option Fee") (receipt of which the Seller acknowledges), the Seller grants to the Buyer an option ("Option") to purchase all of the shares in the Company (being 4,920 fully paid ordinary shares) ("Shares") for the purchase price which is the sum of:

(a)    A$535,785.45 (excluding GST); and

(b)    interest, compounded monthly on the amount of A$535,785.45 at the rate of 12% per annum during the period commencing on 29 August 2015 until the date of actual Completion.

("Purchase Price").

2.    The Option granted under clause 1 has an exercise period commencing on and from the date of this agreement and ending at 5pm Sydney time on 20 November 2015 or such other date as agreed between the parties in writing ("Option Expiry Period") and if:

(a)    exercised, is exercised in respect of all of the Shares: and

(b)    not exercised, lapses after the Option Expiry Period and has no further effect and (without prejudice to any accrued rights or obligations of the parties) there are no continuing rights or obligations of the parties.

3.    The Buyer may nominate a nominee to become the registered owner of the Shares in its place upon settlement of the sale of the Shares ("Completion") occurring under clause 10 of this agreement. The Buyer is taken to have made a nomination if the name/s of the nominee is/are inserted into the space indicated in the "Notice of Exercise of Option" contained in Schedule 1 of this agreement ("Notice"). To avoid doubt, notwithstanding any nomination by the Buyer, the Buyer, being the contracting party under this agreement, remains fully liable for its obligations under this agreement and for any act or omission of the nominee.

…

Exercise of Option

6.    If the Buyer wishes to exercise the Option over the Shares, the Buyer must:

(a)    deliver to the Seller (by no later than 5pm Sydney time on the last day of the Option Expiry Period) a "Notice of Exercise of Option• signed by the Buyer and substantially in the form of the Notice. The date of delivery of the Notice is the "Exercise Date•; and

(b)    pay to the Seller the amount of A$53,578.55 (excluding GST (“Deposit") in immediately available funds on the Exercise Date. Subject to clause 9, the Seller will be entitled to retain any interest accruing on the Deposit upon payment of the Deposit. To avoid doubt, interest on the Deposit is not-part payment of the Purchase Price.

7.    Subject to clause 8, if the Buyer exercises the Option, then a binding agreement is immediately created for the sale and transfer of the Shares by the Seller to the Buyer (or its nominee, as the case may be) on the terms of this agreement.

8.    The creation of a binding agreement under clause 7 is subject to the Property Call Option being exercised in accordance with the provisions of the Property Call Option, and this includes the execution of the contract for sale in respect of the property located at 31-35 Bank Street. Pyrmont NSW (Auto Consol 4579-51) between Dahua Fish Market No.1 Pty Ltd (ACN 603 334 461) (as vendor) and the Buyer or its nominee (as purchaser) ("Contract for Sale"). If the Seller requests, . the Buyer must provide evidence to the satisfaction of the Seller that the Property Call Option has been exercised and the Contract for Sale has been executed by the purchaser named in the Contract for Sale.”

9.    If the Property Call Option is not exercised by the expiry of the Option Expiry Period in accordance with the provisions of the Property Call Option, then the exercise of the Option by the Buyer will have no effect and this agreement will automatically terminate. Upon automatic termination under this clause 9, the Seller will refund the Deposit and the interest accruing on the Deposit (if any).”

30. The agreement provided for a form of Notice, that was Schedule 1 to the agreement, to be addressed to Dahua No 2 and to Felan’s Fisheries and state:

“In accordance with clause 6 of the Call Option and Share Sale Agreement, the Buyer exercises the Option in respect of all of the Shares.

For the purposes of clause 3 of the Call Option and Share Sale Agreement, if the Buyer nominates a nominee to become the registered owner of the Shares in its place upon Completion occurring, the full legal name of the nominee is: ____________ . If this part is incomplete, the Buyer is deemed not to have nominated a nominee.

Terms used but not defined in this notice have the meanings that they have in the Call Option and Share Sale Agreement.”

31. On 18 November 2015, two days before the options were due to expire, Mr Galati had a meeting with Mr Vassallo of a company called Celestino Pty Ltd. He was introduced to Mr Galati through an estate agent, Ms Pritchard, of Wealth Shift, as a potential investor and buyer. Mr Vassallo agreed to pay $24 million for the Bidvest Site. He disclaimed any interest in acquiring the shares in Felan’s Fisheries (at [224]-[226]). The upshot was that, in the course of a meeting on 20 November 2015, it was agreed that a special purpose vehicle that had been incorporated on 19 November 2015, EJC Pyrmont Pty Ltd (“EJC”) would acquire the Bidvest Site and pay the acquisition price for both the land and the shares, but the shares would be acquired by a nominee of TA and Fishbank (at [245]). No notice in or to the effect of the form of notice referred to at [30] was included in the appeal books. The primary judge recorded that there was no formal nomination of TRHS as nominee (at [245]).

32. By 4.00pm on 20 November 2015, Fishbank and TA had entered into an agreement with EJC called a Nomination Deed. Under that agreement, Fishbank and TA were named as the “Grantee”. EJC was described as “Property Purchaser”. Recital B to the Nomination Deed stated that “the Grantee has agreed to nominate the Property Purchaser to exercise the call option in place of the Grantee on and subject to the terms and conditions set out in the deed.” One of the terms contained in the deed (cl 16) provided that within 30 days after completion of the redevelopment of the property by the Property Purchaser to its reasonable satisfaction, the Property Purchaser would pay to the Grantee an amount equivalent to 10% of the Development Profit, being gross revenue earned by the Property Purchaser resulting from the sale of the property after redevelopment, less nominated expenses, administration costs and development overheads incurred in carrying out the development.

33. Clause 2 contained an acknowledgement by the Property Purchaser that in order validly to exercise the property option it was required to deliver to Dahua No 1 satisfactory evidence that the share option would be simultaneously exercised and that accordingly one solicitor, being the Grantee’s solicitor, would act for both the Share Purchaser and the Property Purchaser in relation to the exercise of the Share Option and the Property Option. “Share Purchaser” was defined as: “the person/s whom the Grantee nominates pursuant to the Share Option Deed to be the buyer of the Shares, or where the Grantee does not make a nomination, the Grantee”.

34. The primary judge observed that Mr Galati said, and Mr Deans appeared to accept, that anonymity was regarded as being important in respect of ownership of the shares in Felan’s Fisheries and that neither they nor their companies could be seen to be associated with Felan’s Fisheries for “political reasons” (at [261]).

35. The primary judge did not identify who, as at 20 November 2015, was recorded as the shareholder and director or directors of TRHS. It is clear that its sole director was an accountant, Mr Andrew Schultz. Her Honour said:

“[406]   ASIC records show that on 23 February 2016 Mr Donald Hoban was appointed as director and secretary of TRHS in place of a Mr Andrew Schultz. Mr Deans explained in cross-examination that Mr Schultz was an accountant (“just someone that was willing to stand in that position”, so as again to disguise the nature of the business or the ownership of the business) (T 477). Mr Deans denied that the role of Mr Schultz was to disguise Mr Deans’ involvement in the company and denied that Mr Deans and Mr Galati were both the true owners of the company. (Later, on 1 April 2016, Mr Deans was appointed as director and secretary of the company in place of Mr Hoban.) Mr Deans appears to have accepted that both Mr Schultz and Mr Hoban were persons prepared to act as directors effectively on Mr Deans’ instructions or at his direction.

[407]    As to TRHS, Mr Deans said in cross-examination that it was already a trustee company of a unit trust. Mr Deans agreed (at T 471) that he wanted to disguise the identity of the purchaser of shares in Felan’s Fisheries so TRHS was used in the place of Trading Australia and Fishbank. Mr Deans disagreed that the beneficiaries of the unit trust were going to be Mr Deans and Mr Galati (again, he maintained that it was already an existing unit trust; and he said that there was not a discussion about units to be issued to Mr Deans and Mr Galati) (see at T 472). This is of no little relevance having regard to the fact that the understanding asserted by Mr Galati after the breakdown of the relationship with Mr Deans and Fishbank (and the submissions made in this proceeding) appears to have been predicated on Mr Galati obtaining an interest in the TRHS Unit Trust (and achieving an indirect interest in the Felan’s Fisheries shares in that way); not any interest in the Felan’s Fisheries shares directly.

[408]    Mr Deans said that TRHS was a “complicated structure” and that it was always “tasked” to be that way to disguise who TRHS was (“who was me”) (see T 488). Mr Deans was adamant (T 488) that it was never agreed who would own the rights to Felan’s Fisheries (and added, in a seeming non-sequitur, that he had to force Mr Galati to exercise the option).”

36. The primary judge found that on 1 December 2015 EJC completed the purchase of the Bidvest land and paid for the purchase of the shares in Felan’s Fisheries by TRHS (at [285]).

37. Mr Galati pleaded that he nominated Mr Thanh-Chi Pho as his “appointee director” of Felan’s Fisheries and Mr Deans nominated Mr David Turner as his “appointee director” of Felan’s Fisheries on or about 23 November 2015. Their appointment as directors was recorded in a notice dated 10 December 2015 lodged with ASIC.

38. Mr Deans alleged that Fishbank accepted Mr Thanh-Chi Pho as a director under economic duress. The primary judge made no such finding. Either on or shortly after 26 February 2016 Mr Pho was removed as a director of Felan’s Fisheries. A Mr Hoben was appointed as a director and secretary in place of Mr Schultz on 23 February 2016. He resigned on 1 April 2016 and was replaced by Mr Deans. It is common ground that Mr Deans is the holder of all of the shares in TRHS.

39. As noted above, the primary judge recorded (at [407]) Mr Deans’ evidence that TRHS was already a trustee of a unit trust. No unit trust deed or register of unit holders was tendered.

40. Another document entered into on 20 November 2015 was called a “general security deed”. It was signed by Mr Deans on behalf of Fishbank, Mr Galati on behalf of TA, and Mr Schultz as the sole director and secretary of TRHS “ATF TRH Unit Trust”. It recited:

“This Deed is given to secure payment of amounts owing by the Grantor to the Secured Party. The amount being secured $800,350.00 plus interest pursuant to the terms of the Loan Agreement between Fishbank Development Corporation Pty Ltd and Trading Australia Pty Ltd (as Lender) and TRHS Pty Limited (as Borrower).”

41. The Grantor was TRHS. The Secured Party was Fishbank and TA.

42. We were not referred to any signed copy of a loan agreement but it was common ground that an unsigned copy of a loan agreement had been tendered below between Fishbank and TA as lenders, and TRHS as borrowers. It provided that Fishbank and TA would advance $800,350 to TRHS for the following purposes:

“1.   To pay the price to purchase all of the issued shares in Felan’s Fisheries Pty Ltd ABN 000 141 604 from Dahua Fish Market No. 2 Pty Ltd ($551,981.99);

2.   To pay transfer duty in relation to the purchase of all of the issued shares in Felan’s Fisheries Pty Ltd from Dahua Fish Market No. 2 Pty Ltd ($3,350.00);

3.   To pay the subscription price to acquire an additional 343 ordinary class shares in Felan’s Fisheries Pty Ltd ($240,100.00); and

4.    To pay the costs of establishing this loan, statutory liabilities, legal fees, accounting fees ($4,918.01).”

43. On 10 June 2016 solicitors acting for Mr Galati wrote to Fraser Clancy Lawyers, who acted for Felan’s Fisheries and asserted that Mr Galati was “…one of the two shareholders [sic] in the Unit Trust which is the ultimate beneficial owner of the plaintiff company”. The plaintiff company referred to was Felan’s Fisheries which was then engaged in litigation with Sydney Fish Markets over its licence. The primary judge observed that in so far as that correspondence accurately reflected Mr Galati’s apparent understanding it was not that TRHS held the Felan’s Fisheries shares on trust for Fishbank or for the Deans and Galati interests, but rather was to hold the shares in its capacity as trustee of the TRHS unit trust (at [425]). However there is no inconsistency between those concepts if Fishbank and TA, or Mr Deans and Mr Galati, were or were to be the only unit holders.

44. Fraser Clancy responded on 15 August 2016. They asserted:

“TRHS was established long ago on Mr Dean's instructions. We confirm our previous advice to you on more than one occasion that the ultimate beneficial owner of units in TRHS is, following TRHS' being nominated to exercise the option to buy the shares in Felan's, FDC and your client company, in such shares as they may agree or as is ultimately determined by a court. As you are aware, your client is represented by you in relation to the dispute and we understand your client is claiming 50% ownership, and FDC is represented by Chris Perry of Pure Legal and we understand that FDC is claiming a greater share than 50%. As you know, we are not representing either party in this dispute.”

45. Fraser Clancy denied that they were acting for Fishbank or Mr Deans in relation to the issue of who was the ultimate beneficial owner of units in TRHS, but were acting for Felan’s Fisheries in litigation with Sydney Fish Market Pty Ltd. As Mr Deans was by this time the sole director of Felan’s Fisheries and held all of the shares in TRHS which in turn held all of the shares in Felan’s Fisheries, Fraser Clancy’s letter was probative evidence of Mr Dean’s views in so far as they were against interest.

Primary judge’s reasoning on trust claim

46. The primary judge rejected Mr Galati’s claim to a 50% beneficial interest in TRHS’s shareholding in Felan’s Fisheries for the following reasons:

[615] As to the rights to acquire the shares in Felan’s Fisheries, the relevant Call Option document makes clear that these were jointly held by Fishbank and Trading Australia; so that, on exercise of the option, the two entities would jointly have acquired those shares (and I accept that, in the absence of any express agreement to the contrary, they would have done so as tenants in common – see s 26 of the Conveyancing Act).

[616]   Senior Counsel for the Deans interests candidly accepted that, if all one had was the Nomination Agreement, then it might be concluded that (by default) that each party had an interest in half of the shares. However, it is said that a trust must be inferred from all the documents and that the overriding circumstances by mid-2015 (on Mr Galati’s evidence) is that the parties had finished as a team. Therefore, it is submitted that the so-called default position no longer applies – that there is no reason for the holding of the shares as property for a joint venture the underlying premise of which has failed. Hence, it is said that when the nomination of TRHS as the shareholder was made there is nothing to say that it was intended that TRHS hold those shares on trust for the respective interests; and that such evidence is necessary to make a finding of trust.

[617]   Thus, while it appears to be accepted by the Deans interests that the Nomination Agreement in isolation might suggest an agreement or understanding that the shares in Felan’s Fisheries would be held jointly (and to my mind this is the high point of Mr Galati’s claim to an interest in the shares), the difficulty is that what happened, instead, was that Fishbank and Trading Australia appear jointly to have nominated TRHS to be registered as the owner of the shares (indeed, they must have done so in order for this to have occurred, as there is certainly no dispute that TRHS is the registered holder of the shares), without any concluded agreement as to the interest it was anticipated that Trading Australia would have in the TRHS unit trust.

[618]   It is clear that this was in an attempt to disguise the involvement of at least Mr Deans (and seemingly also Mr Galati) in the shareholding of Felan’s Fisheries for “political reasons” related to the then ongoing disputes with the SFM Board. However, I am not satisfied that there was any express agreement between the parties as to the basis on which TRHS was to hold the shares (rather the evidence appears to suggest that it was understood by Mr Galati that it would do so in its capacity as trustee for the unit trust in which he later asserted he had an ownership interest). In my opinion, the most likely conclusion is that the parties informally agreed that the shares would be acquired by TRHS as the trustee of a unit trust (units in which would at some stage be issued to Mr Galati in a proportionate amount then still to be agreed – and assuming that the project was to proceed at that stage).

[619]   I have no doubt that (for “political reasons”) it was intended that the Felan’s Fisheries shares were to be held by TRHS (most probably as the trustee for the TRHS Unit Trust) for the benefit and purposes of the overall joint venture (i.e., the redevelopment project) proposed to be progressed; and in that sense for the benefits of the respective interests ultimately pursuing the proposed joint venture. However, the Deans and Galati interests chose to nominate TRHS as the shareholder for this purpose. I am not persuaded that there was a separate trust in respect of the shares in that company. Rather, I consider that the parties were at that stage yet to agree what interest in the TRHS Unit Trust was to be acquired by Mr Galati or the Galati interests as part of the proposed joint venture (a conclusion reinforced by the Fraser Clancy Lawyers letter to which I have already referred, in which it was noted that the extent of the interest was uncertain) – and it remained undecided as to what that interest would be. Moreover, the purpose of the proposed joint venture has come to an end – since it is abundantly clear that whatever the prospects of a proposed redevelopment it will not be pursued by a joint venture between the Galati and Deans interests respectively.

[620]   In the absence of a trust in respect of the Felan’s Fisheries shares, and in the absence of an agreement as to what was to happen in the event that the joint venture did not proceed, I am left to conclude that TRHS retains the legal ownership of the shares in Felan’s Fisheries as trustee for the TRHS Unit Trust (and that, as Mr Deans controls TRHS, he retains the indirect benefit or control of the Felan’s Fisheries shares; albeit for the benefit of the unitholders of the TRHS Unit Trust – of which, due to the failure of the parties to reach agreement on this, Mr Galati is not one).”

47. In rejecting Mr Galati’s submissions on equitable estoppel the primary judge said:

“[624]    As to the claim in equitable estoppel, while I accept that there was an assumption on both sides that the parties would work together in a partnership or joint venture relationship for the implementation of the proposed redevelopment, I find that the expectation was that the reward or remuneration that the Galati interests would receive (for Mr Galati’s efforts to find investors or financiers for the project) would be an interest (to be agreed) in the project (ultimately via the TRHS Unit Trust)…

[625]    It is clear that as the remuneration to Mr Galati was largely to come from a completed development (or at least one to which the Agreement Principles would apply) – not from the introduction of a purchaser for the Bidvest assets alone; there is nothing unconscionable in Mr Deans now withdrawing from the failed relationship (and indeed Mr Galati himself chose not to continue a development proposal with Mr Deans as part of his team from at least around November 2015).

…

[629]   …The reality seems to be that the respective interests were, by the time of the nomination of TRHS as owner of the Felan’s Fisheries shares, largely if not indeed wholly, pursuing their own objectives (and often at cross-purposes). In circumstances where the joint venture has clearly come to an end, and where the arrangements under which the Galati interests were to participate in the joint venture with reference to those shares were never agreed, there was no conventional basis or assumption on which they were proceeding and it is not unconscionable now for the Deans interests to act as they have done.”

48. Mr Galati submitted that the primary judge erred because her Honour ought to have found that there was an “agreed trust” whereby TRHS held the Felan’s Fisheries shares on trust as to 50% for Mr Galati. The “agreed trust” was characterised initially as a form of express trust. In Bosanac v Commissioner of Taxation [2022] HCA 34, Gordon and Edelman JJ said (at [93]) that an express trust arises from an objective or manifested intention to create a trust. But there was no written or oral declaration of trust, either by anyone authorised to make a declaration of trust by TRHS, or by a settlor, arguably Fishbank and TA, if their nomination of TRHS could be characterised as a settlement of the Felan’s Fisheries shares on TRHS (which it could not). On her Honour’s findings the objects of any trust lacked certainty. For the reasons below the better characterisation of the asserted trust is that of a common intention constructive trust.

49. In their written submissions, counsel for Mr Galati also submitted that the primary judge erred in failing to find a constructive trust to the same effect as the express trust he asserted. Counsel for the respondents appeared to assume that the contention that the shares were held on constructive trust was based upon a constructive trust of the kind of which Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 are examples, that is, where the parties have been in a joint relationship or joint endeavour which has failed without attributable fault, and where the parties did not specifically intend that the legal owner would enjoy the beneficial interest in the property in the circumstances which then obtained. That was not the form of constructive trust contended for by Mr Galati. Rather, he submitted that the acquisition by TRHS of the shares in Felan’s Fisheries was part of the parties’ continuing joint venture in respect of which each party owed a duty of good faith to the other as the primary judge recognised by requiring Mr Galati to account for 50% of the $1,799,820.95 that he received through Ms Pritchard that had been paid by EJC as part of its arrangements with Fishbank and TA to acquire the Bidvest Site.

50. The respondents submitted that this claim had not been pleaded and that although it had been raised in Mr Galati’s closing written submissions, the claim had never been properly particularised. They submitted that the relationship had been terminated. Fiduciary duties can survive the termination of a relationship and justified the primary judge’s finding that Mr Galati was liable to account for the moneys he received. But because the joint venture had ended (so it was contended), Mr Deans had no obligation as director of TRHS to cause TRHS to hold the shares on trust for TA or Mr Galati.

51. In his submissions in reply, Mr Galati contended that TRHS held the shares in Felan’s Fisheries on a resulting trust, as to a 50% interest, for TA. As I understood the submission this was because Fishbank and TA held the option to acquire the shares in Felan’s Fisheries granted by Dahua No 2. By nominating TRHS to acquire the shares with no consideration provided by TRHS, they were in the same position as a transferor of personal property who transfers that property to a third party for no consideration in which case there is the presumption that the third party will hold the property on trust for the transferor (Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364-365; [1956] HCA 28).

52. But the property in which Mr Galati claims a beneficial interest is not the option rights but the shares in Felan’s Fisheries. To acquire those shares Dahua No 2 was paid $535,785.45 plus interest. The moneys were provided by EJC. Any presumption of resulting trust in favour of EJC was rebutted. Fishbank, TA and TRHS treated the moneys provided by EJC as having been paid to Fishbank and TA. They provided the money to TRHS by way of loan, not as a direct payment for the purchase of the shares. That treatment of the payment negates the presumption of a resulting trust (Calverley v Green (1984) 155 CLR 242 at 246; [1984] HCA 81).

53. However, it is not inconsistent with both Fishbank and TA, through Mr Deans and Mr Galati, having a common intention that TRHS would hold the shares on trust for Fishbank and TA giving rise to a common intention constructive trust. A common intention constructive trust arises where the parties have agreed, or it was their common intention, that a claimant should have an interest in property owned by the other and the claimant has acted to his or her detriment on the basis of that agreement or common intention (Grant v Edwards [1986] Ch 638 at 646-647, 651-2; Green v Green (1989) 17 NSWLR 343 at 354-6; Maharaj v Chand [1986] AC 898 at 907; Shepherd v Doolan & Ors; Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42).

54. I venture to repeat what I said in Shepherd v Doolan:

“[34]    Where a constructive trust is imposed, based upon the parties’ common intention as to the ownership of property upon which the claimant has acted to his or her detriment, the inquiry is as to the actual intention of the parties. The law does not impute a presumed intention to the parties based upon what the Court considers fair and reasonable persons in the position of the parties would have intended had they turned their minds to the issue. (Pettitt v Pettitt [1970] AC 777 at 804, 810, 816-817; Gissing v Gissing [1971] AC 886 at 900, 902, 905-909; Allen v Snyder [1977] 2 NSWLR 685 at 690, 698, 701).

[35]    It is unnecessary to enter the debate as to whether a trust based on the parties’ common intention is properly characterised as a constructive trust, or whether it should be characterised as an express trust which is enforceable notwithstanding the want of writing as it would be an equitable fraud for the legal owner to rely on the absence of writing to deny the beneficiary’s interest. (Allen v Snyder at 692-3; 699). In later cases, eg Grant v Edwards [1989] Ch 638; Maharaj v Chand [1986] AC 898 at 907; Green v Green (1989) 17 NSWLR 343; Brandling v Weir [2003] NSWSC 723; Parianos v Melluish (2003) 30 Fam LR 524, this class of trust has been classified as a constructive trust, even though it is based on the parties’ actual intentions, rather than imposed despite their intentions.

[36]    The intention to be established need not be that the parties have a specific share of the property. It is sufficient that they intend that the claimant should have a beneficial interest or ‘some form of proprietary interest’. (Green v Green at 355, 356; Grant v Edwards at 654; Parianos v Melluish at [31], [39]).

[37]    The intention may be established in various ways. There may be an agreement between the parties as to how the property should be held. There may be express statements as to their intention. Their intention may be inferred from their conduct. The question of what acts demonstrate an agreement or common intention referable to the beneficial enjoyment of the property is one of evidence, not law. (Allen v Snyder at 691; Green v Green at 355)…

…

[39]    Other evidence from which conclusions may be drawn about the intentions of the parties include declarations of the parties before or at the time of the transaction or so close in time after the transaction as to constitute a part of it. Subsequent declarations of intention are only admissible against interest. (Calverley v Green (1984) 155 CLR 242 at 262 and 269; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; Bryson v Bryant (1992) 29 NSWLR 188 at 215).

[40]    The plaintiff must also show that she acted to her detriment in a way referable to the agreement or intention that she have an interest in the property. (Austin v Keele (1987) 10 NSWLR 283 at 291; Grant v Edwards at 648; Carruthers v Manning [2001] NSWSC 1130 at [124]). Conduct which is insufficient to establish a common intention as to the ownership of the property may be sufficient to constitute relevant actions to the plaintiff’s detriment to establish a trust if the common intention is established otherwise. Conduct may be both the evidence from which an intention that the plaintiff have a beneficial interest can be inferred and the act of detrimental reliance. (Green v Green at 355; Grant v Edwards at 647, 652, 655). In Grant v Edwards Nourse LJ said (at 648) that to qualify as acting on the common intention, the conduct must be such that the plaintiff could not reasonably have been expected to embark upon it unless she were to have an interest in the property. In Green v Green (at 357) Gleeson CJ, with whom Priestley JA agreed, approved a less stringent test taken from the judgment of Sir Nicholas Browne-Wilkinson VC in Grant v Edwards (at 657) that:

‘... once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house. … The holding out to the claimant that she had a beneficial interest in the house is an act of such a nature as to be part of the inducement to her to do the acts relied on. Accordingly in the absence of evidence to the contrary, the right inference is that the claimant acted in reliance on such holding out and the burden lies on the legal owner to show that she did not do so...’

[41]    The quantum of the claimant’s beneficial interest will be that which the parties agreed upon or intended, if that can be established. In Green v Green and in Parianos v Melluish it was held that although the parties did not turn their minds to the particular form of title which they intended the claimant to have, the conclusion which best gave effect to the intentions of the parties was that they were beneficially entitled to the property as joint tenants, so that upon the death of the respondent, the claimant became the absolute beneficial owner by survivorship.

[42]    If the evidence does not permit of a finding as to the precise size, nature and extent of the beneficial interest the parties intended the claimant to have, one starts with the maxim that equality is equity. (Green v Green at 355). But that standard can and should be departed from where the parties make disproportionate contributions to the acquisition of the property. In Baumgartner v Baumgartner, Mason CJ, Wilson and Deane JJ said (at 149-150):

‘Equity favours equality and, in circumstances where the parties have lived together for years and have pooled their resources and their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants-in-common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind.’

…”

55. These principles were stated in the context of domestic relationships, but are not on that account to be disregarded. In the context of domestic relationships they have been said to be equally applicable to arrangements of a commercial or quasi-commercial nature as to those of a purely domestic kind (Green v Green at 354).

56. In Austin v Keele (1987) 10 NSWLR 283, the Privy Council dismissed a claim made between parties to a commercial arrangement for a trust over land based on the parties’ common intention not because the principles in Grant v Edwards (later applied in Green v Green) applied only to domestic relationships, but because the plaintiff did not act to his detriment in a way referable to the parties’ common intention (at 291).

57. In Austin v Keele Lord Oliver opined (at 290) that, in essence, the doctrine in Grant v Edwards is an application of proprietary estoppel. As Basten JA observes (at [149]), in Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336, Leeming JA raised a question as to whether common intention constructive trusts continue in Australia or are subsumed in the principles of proprietary estoppel, (at [113] to [119]). His Honour expressed no concluded view. Having regard to his Honour’s observations at [118], I do not assume that his Honour even inclines to a negative answer to that question.

58. Neither party contended that the doctrine of common intention constructive trusts is no longer law in Australia.

59. Green v Green and Parsons v McBain [2001] FCA 376; 109 FCR 120 were decided after Austin v Keele and neither suggested that the doctrine of common intention constructive trusts was subsumed in the doctrine of proprietary estoppel.

60. Proprietary estoppel, whether by encouragement or acquiescence, requires that the defendant induce an expectation by the plaintiff that he or she has, or will acquire, rights in respect of the property. The element of “inducement” has not been described as necessary for the formation of a common intention constructive trust, although the facts in a particular case, particularly where the common intention arises from agreement (as in Austin v Keele), might also support a finding of inducement.

61. Although Mr Galati did not press his challenge to the primary judge’s rejection of his claim based on equitable or conventional estoppel, he did challenge some of the primary judge’s factual findings relevant to that claim. I would uphold that challenge (see [73]-[76] below). As no issue was raised that the doctrine of common intention constructive trusts was subsumed in the principles of proprietary estoppel, there is no occasion to consider whether the primary judge’s estoppel findings, if challenged, would be upheld.

55. Mr Galati did not contend that there was an express oral agreement between Mr Deans and him that TRHS would hold the Felan’s Fisheries shares on trust for Fishbank and TA, or for Mr Deans and him. Any such agreement would be contrary to the primary judge’s finding (at [618]-[620]). Nor does the evidence suggest that such an agreement should be inferred.

56. But there is powerful evidence, not inconsistent with the primary judge’s findings, that at the time Mr Galati and Mr Deans agreed that TRHS would acquire the shares in Felan’s Fisheries, they had a common intention that the shares would be held by TRHS on behalf of TA and Fishbank.

57. First, TA and Fishbank could have acquired the shares using the moneys provided by EJC. Mr Deans could not have prevented that from happening.

58. Secondly, the reason for the shares not being acquired by Fishbank and TA equally was the desire for secrecy.

59. Thirdly, the suite of documents entered into on 20 November 2015 showed that the joint venture agreement was still on foot. By the Nomination Deed with EJC, it was agreed that both Fishbank and TA would be entitled to 10% of any Development Profit earned by EJC from redevelopment of the Bidvest Site (at [32] above). By the general security deed and the unsigned loan agreement (at [40] above), the parties agreed that Fishbank and TA would jointly lend the purchase price and other moneys to TRHS.

60. The primary judge did not find that the joint venture had come to an end before the nomination of TRHS to acquire the shares in Felan’s Fisheries. Her Honour found (at [619]) that it was intended that the shares in Felan’s Fisheries be held by TRHS for the purposes of the overall joint venture proposed to be progressed. Her finding in the last sentence of [619] was that the proposed joint venture “has” come to an end, not that it “had” come to an end before the nomination of TRHS as the party to acquire the shares. Her Honour found (at [629]) that by the time of the nomination of TRHS, the parties were “largely, if not indeed wholly, pursuing their own objectives” but did not find that, for that reason, the joint venture had already come to an end. Her Honour’s conclusion in the last sentence of [629] is not a finding that the joint venture had come to an end before the nomination of TRHS.

61. Her Honour found (at [822]) that the payment of $1,799,820.95 by EJC to TA was a secret commission that was paid to TA on behalf of (and thus as an agent of) the joint venturers. That was a finding that the joint venture had not come to an end by the time that payment was made. The payment by EJC to Ms Pritchard was made on 8 December 2015 (at [333]). $1,799,820.95 was transferred by Ms Pritchard to TA on 9 December 2015 (at [333]). The primary judge found that EJC paid for the purchase of the shares in Felan’s Fisheries from Dahua No 2 by TRHS on 1 December 2015 (at [285]). Accordingly, her Honour found the joint venture was subsisting when TRHS was nominated to acquire the shares in Felan’s Fisheries. As Mr Galati submitted, in those circumstances it would be a breach of Mr Deans’ and Fishbank’s fiduciary duties owed to TA and Mr Galati to claim that they were entitled to the whole beneficial interest of the Felan’s Fisheries shares held by TRHS, or to claim that TRHS held its legal title free from the claim of any beneficial owner.

62. Fourthly, both parties appointed a nominee director to Felan’s Fisheries. Although Mr Deans said that this was done under duress, the primary judge made no such finding and the respondent’s notice of contention does not include a contention that her Honour ought to have done so.

63. The primary judge’s reasoning at [617]-[619] quoted at [46] above contains three related themes. One is that the parties anticipated that a unit trust would be established. Her Honour had recorded Mr Deans’ evidence that a unit trust had already come into existence. There was some corroboration of that in the execution of the general security deed of 20 November 2015 in which Mr Schultz executed the deed on behalf of TRHS “ATF TRH Unit Trust”. But if such a trust deed had been executed and units issued, but not to Mr Galati or TA, it is striking that no trust deed, nor register of unit holders, was tendered.

64. Fraser Clancy’s letter of 15 August 2016 quoted at [44] above suggests that as late as that date no units had been issued. The primary judge recognises this at [617] and [618] in finding that there was no express agreement between the parties as to the basis upon which TRHS was to hold the shares and that units were to be issued to Mr Galati “in a proportionate amount then still to be agreed” (at [618]). Likewise, her Honour concluded that the parties were at that stage “yet to agree what interests the TRHS unit trust was to be acquired by Mr Galati or the Galati interests as part of the proposed joint venture” (at [619]).

65. However, this is not a reason for denying TA a beneficial interest in the Felan’s Fisheries shares. Rather, it is consistent with the parties’ intending that TA have a beneficial interest in the shares but not having agreed upon the quantum of that interest. In the absence of evidence or a finding of disproportionate contributions to the acquisition of the shares, the maxim that equality is equity would apply (Green v Green at 355; Shepherd v Doolan at [42]). In any event, for the reasons above, it can be inferred that the parties’ intentions at the time the shares were acquired, was that they be held equally.

66. The third theme in the primary judge’s reasoning is that the purpose of the proposed joint venture had come to an end (at [619]) and her Honour concluded that the most likely conclusion was that units would at some stage be issued to Mr Galati in an amount still to be agreed and on the assumption that the project was to proceed “at that stage” (at [618]), which I take to be at the stage that units were to be issued. The respondents submitted that this negated the requisite common intention to provide a basis for equitable intervention by way of constructive trust.

67. The respondents also relied upon the primary judge’s reasoning at [624], [625] and [629] quoted above, which implies a finding that the parties’ intention was only that Mr Galati would have a beneficial interest in the shares if and when units were issued to him, which would depend upon the joint venture project still proceeding at that time.

68. But that conclusion is inconsistent with Fraser Clancy’s letter of 15 August 2016 which recognised that Fishbank and TA were the “ultimate beneficial owners of units in TRHS following TRHS’ being nominated to exercise the option to buy the shares in Felan’s”, albeit in proportions yet to be determined.

69. Mr Deans denied the accuracy of that statement. He says that Mr Fraser was not acting as his solicitor at the time, although he had acted for him when TRHS was established. However, the letter was probative evidence of Mr Deans’ view at the time, as he was then the sole director of Felan’s Fisheries for whom Mr Fraser was acting. Mr Fraser was not called. He was in Mr Deans’ camp and the respondents were the parties who could be expected to call Mr Deans if his evidence would have assisted their case.

70. Having regard to this, together with the four considerations identified at [64], [65], [66] and [69] above, I conclude that at the time of TRHS’ nomination it was the parties’ common intention that TRHS would hold the shares beneficially for Fishbank and TA in equal shares.

71. TA acted to its detriment in a way referable to that common intention by agreeing that TRHS be nominated to acquire the Felan’s Fisheries shares and providing the funds jointly with Fishbank to allow it to do so.

72. The respondents submitted that it was not open to Mr Galati to pursue such a claim on appeal because it had not been raised below. The respondents did not dispute that the claim to an inferred express trust arising from an inferred agreement had been raised below. The respondents’ solicitor made an affidavit that was read on the appeal in which he argued that the respondents would be prejudiced if Mr Galati were permitted to pursue his resulting trust claim as articulated in his written submissions in reply. Although not repeated in the respondents’ final written submissions provided with leave after the hearing of the appeal, I take it that the respondents make the same objection to Mr Galati’s claim to be the beneficiary of a common intention constructive trust.

73. The respondents’ solicitor deposed that had Mr Galati sought leave at trial to amend his pleading to allege a resulting trust he would have sought instructions and obtained counsel’s advice with a view to pursuing various evidentiary inquiries. However the inquiries referred to were equally relevant to the claim of an inferred express trust as to the claim for a common intention constructive trust.

74. At trial the respondents contended that if TRHS held the Felan’s Fisheries shares on trust for TA, then TA held its beneficial interest in the shares on a constructive or resulting trust for Fishbank. The primary judge rejected the claim for a constructive trust which was propounded on the basis of the failure of the substratum of the parties’ joint venture (at [910]-[916]).

75. By an amended notice of contention the respondents claimed:

“f.   there having been no pleaded or articulated claim made by the appellant for the declaration of a resulting trust;

g.   if a claim for a resulting trust had been made by the appellant, the primary judge would have:

i.   needed to consider the claim for a resulting trust by the first – fourth respondents in favour of the second respondent but at J [917] did not need to do so; and

ii.   found a resulting trust in favour of the second respondent in respect of the Felan’s shares;

h.   if a claim for a resulting trust had been made by the appellant, the primary judge would have:

i.   needed to consider the claim by the first – fourth respondents for a constructive trust in favour of the second respondent in the light of such resulting trust claimed by the appellant;

ii.   had she not found a resulting trust, would have found a constructive trust in favour of the second respondent in respect of the Felan’s shares.”

83. The respondents pleaded:

“126    Further, whether or not it is found that there was an agreement to give TA half of the legal rights held by FDC In the Proposed Development (which is denied), or a joint endeavour lo engage Dahua (which is admitted), by reason of:

a)    TA having contributed no funds for the acquisition of TA's 50% legal rights in the Proposed Development; and/or

b)    Dahua not proceeding to invest.

128    There was a total failure of consideration by TA and/or a failure of the substratum of any such agreement or Joint endeavour without attributable blame.

127   In the premises of:

a)    the absence of contribution of consideration by TA; and/or .

b)    failure of the substratum of any such agreement or joint endeavour without attributable blame; and/or

c) the failure of TAA and MML to inform FCC or Its lawyers of the inclusion or effect of that clause 10 of the Deed of Exclusivity when changes to the Deed of Exclusivity were being negotiated

TA should be declared to hold a legal interest on a resulting trust for the benefit of FDC In respect of paragraph a) above, or on a constructive trust for the benefit of FDC in respect of paragraphs b) and c) above.”

84. The primary judge rejected the constructive trust claim. Her Honour accepted that there had been a failure of the substratum of the joint venture without blame attributable to Mr Deans or Fishbank (at [915]). But her Honour held (at [916]):

“[916]   …The arrangement reached with the Galati interests was clearly one whereby the consideration to be provided by Trading Australia for its interest in the option rights was the agreement by it to use its best endeavours to attract an investor or financier to the project. Its ultimate inability to find a financier for the whole of the project does not mean that there was a failure of consideration and does not detract from the fact that ultimately, Trading Australia contributed Mr Galati’s skills so as to be able jointly to exercise the Call Option Deeds to the project. Thus, I see no basis to impose a constructive trust over Trading Australia’s interests in the joint venture (but in any event nothing turns on this because I am not persuaded that there was any concluded agreement as to the TRHS shares being held on trust).”

85. The respondents have not shown any error in this reasoning. In particular, they have not shown that having regard to the parties’ respective contributions to the joint endeavour both financial and non-financial, there was a disproportion of contributions that would make it unconscionable for TA and Mr Galati to assert their 50% beneficial interest in the Felan’s Fisheries shares.

86. The primary judge did not deal expressly with the alternative claim that TA held its beneficial interest in the Felan’s Fisheries shares on resulting trust for Fishbank. Her Honour found (at [917]) that because, on her Honour’s findings, TA had no interest in those shares, there was nothing over which a resulting or constructive trust ought to be declared for the benefit of Fishbank.

87. In support of its contention that TA held any beneficial interest that it might have in the Felan’s Fisheries shares on resulting trust for Fishbank, the respondents submitted that that Felan’s share option originated with Mr Deans who acquired the option in 2013 and contributed it to the co-venture after August 2014. This is not correct.

88. On 25 February 2013 Fishbank entered into an agreement with Bidvest which was then the owner of 25% of the shares in Tenants and Merchants whereby Bidvest agreed to support Fishbank’s proposal to the New South Wales Government for the redevelopment of the land on the Blackwattle Bay foreshore, which included the Bidvest Site. Bidvest did not then grant an option over its shares in Tenants and Merchants to Fishbank.

89. The respondents submitted that on 13 August 2014 Fishbank entered into an agreement with Bidvest and N Stevenson & Co Pty Ltd for Fishbank to have the option to purchase the Bidvest Site and Bidvest 25% shareholding in Tenants and Merchants. They submitted that although not stated in the judgment, it was not understood by them to be controversial that the options “conditionally transferred to the Dahua Group had originally been obtained by FDC in August 2014”.

90. Mr Deans deposed that on or about 13 August 2014 Fishbank agreed “in-principle terms” for the purchase by Fishbank or its nominees of, inter alia, “the Tenant’s shares from Bidvest”. He annexed a copy of a sales advice setting out the “in-principle terms of these purchases”. The sales advice issued by Deans Property Pty Ltd referred to a sale of the property of the Bidvest Site, the business conducted by Felan’s Fisheries, and Bidvest’s then 25% shareholding in Tenants and Merchants for a price of $15 million to Fishbank or its nominee to be advised before entry into contracts. No such agreement was entered into. The agreement said to have been made on 13 August 2014 was in any event not an agreement for Fishbank to have the option to purchase the Bidvest Site and Bidvest’s shareholding in Tenants and Merchants.

91. Fishbank did not transfer to TA for no consideration any option rights to acquire the shares in Felan’s Fisheries. Those rights were granted by Dahua No 2.

92. Accordingly, this ground of the notice of contention should be rejected.

93. In their notice of contention the respondents also submitted that Mr Galati’s claim that TA held a beneficial interest in the Felan’s Fisheries shares should be rejected on the ground of unclean hands. The respondents acknowledged that the defence of unclean hands had not been pleaded. The respondents do not take issue with Mr Galati’s submission that such a defence was not mentioned at all in written or oral submissions at trial. One of the grounds for the defence of unclean hands was Mr Galati’s obtaining the secret payment of $1,799,820.95 and not accounting for it to Mr Deans and Fishbank. But Mr Galati has been required to account for that receipt. The other grounds said to give rise to a defence of unclean hands were that Mr Galati was secretly seeking to oust Mr Deans and Fishbank from the joint venture and refusing to provide Mr Deans with the final say on financing and sale arrangements as provided for in the Agreement Principles document.

94. Whatever be the merits of those contentions, they do not have “an immediate and necessary relation to the equity sued for” (Dewhirst v Edwards [1983] 1 NSWLR 34 at 51; Carantinos v Magafas [2008] NSWCA 304 at [58]).

95. For these reasons I would reject the respondent’s amended notice of contention. I conclude that Mr Galati as assignee of TA’s interest is beneficially entitled to a 50% interest in the shares held in TRHS and Felan’s Fisheries as tenant in common with Fishbank. I propose that a declaration be made to that effect.

Was Mr Deans liable to account to TA or Mr Galati for a secret commission?

96. At [7] above I have referred to the agency agreement Bidvest entered into with Deans Property Pty Ltd on 2 July 2002. At [20] I have quoted the letter signed by Mr Deans for Deans Property and Mr Berson for Bidvest providing for the payment of commission to Deans Property.

97. The 2002 agency agreement between Bidvest and Deans Property included the following terms:

“3. (i) The Agent shall be entitled to a fee of [as per attached commission fee for service document] if, during the Agency Period, the property is sold either by (a) the Agent; (b) by any other Agent; or (c) by the Principal.

(ii) The Agent shall also be entitled to a fee at the agreed amount if at any time following the expiration of the exclusive Agency Period the Principal enters into a contract for the sale of the property to a Purchaser effectively introduced to the Principal or the Property during the exclusive Agency Period by the Agent, by any other agent or by the Principal.

…

4. (i) In addition to the exclusive selling rights generated to the Agent under cl 2 the Principal also grants to the Agent non-exclusive selling rights to the property commencing on the expiry of the Agency Period specified in cl 2 and then until such time as either the property is sold or the agreement is terminated by either party giving notice in writing, now called the “continuing agency period”.

(ii) The Agent shall be entitled to the amount of the fee specified in cl 3 if during the continuing Agency Period they effectively introduce to the Principal a purchaser who subsequently enters into a binding contract.”

98. The Agency Period specified in cl 2 expired on 31 October 2002.

99. The Continuing Agency Period was to continue after that time until either the property was sold or either party gave notice of termination of that period. Evidently, no notice of termination of the Continuing Agency Period was given by either Bidvest or Deans Property. Their agreement of 18 November 2014 acknowledges as much. By cl 2 of the agreement of 18 November 2014 Deans Property agreed to accept $500,000 plus GST if the sale of the business to Dahua was completed by the end of April 2015 for at least $18 million.

100. On 1 December 2014 TA, Fishbank, Mr Deans, Mr Galati and Madison Marcus Advisory Pty Ltd (“Madison”) entered into a Commission Sharing Agreement which provided for Madison to assist TA in procuring investors to invest into the Blackwattle Bay Project. The Deed of 1 December 2015 called a “Deed of Binding Commission Distribution Direction” provided that the parties acknowledged that Madison Marcus Advisory was the effective cause of the introduction of Dahua to the investment. Other details of that deed are not presently relevant.

101. The fact that by this deed TA and Mr Deans acknowledged that Madison, and not Deans Property, was the effective introducer of the Dahua Group does not affect the primary judge’s conclusion that Deans Property’s receipt of the $550,000 commission from Bidvest arose from arrangements entered into before the joint venture with TA. The position might have been different if TA or Mr Galati had been the effective introducer of the Dahua Group, but Mr Galati does not contend for such a finding.

618   It is clear that this was in an attempt to disguise the involvement of at least Mr Deans (and seemingly also Mr Galati) in the shareholding of Felan’s Fisheries for “political reasons” related to the then ongoing disputes with the SFM Board. However, I am not satisfied that there was any express agreement between the parties as to the basis on which TRHS was to hold the shares (rather the evidence appears to suggest that it was understood by Mr Galati that it would do so in its capacity as trustee for the unit trust in which he later asserted he had an ownership interest). In my opinion, the most likely conclusion is that the parties informally agreed that the shares would be acquired by TRHS as the trustee of a unit trust (units in which would at some stage be issued to Mr Galati in a proportionate amount then still to be agreed – and assuming that the project was to proceed at that stage).

619   I have no doubt that (for ‘political reasons’) it was intended that the Felan’s Fisheries shares were to be held by TRHS (most probably as the trustee for the TRHS Unit Trust) for the benefit and purposes of the overall joint venture (i.e., the redevelopment project) proposed to be progressed; and in that sense for the benefits of the respective interests ultimately pursuing the proposed joint venture. However, the Deans and Galati interests chose to nominate TRHS as the shareholder for this purpose. I am not persuaded that there was a separate trust in respect of the shares in that company. …

620   In the absence of a trust in respect of the Felan’s Fisheries shares, and in the absence of an agreement as to what was to happen in the event that the joint venture did not proceed, I am left to conclude that TRHS retains the legal ownership of the shares in Felan’s Fisheries as trustee for the TRHS Unit Trust (and that, as Mr Deans controls TRHS, he retains the indirect benefit or control of the Felan’s Fisheries shares; albeit for the benefit of the unitholders of the TRHS Unit Trust – of which, due to the failure of the parties to reach agreement on this, Mr Galati is not one).”

Claims on appeal

128. On appeal, Mr Galati initially contended that there was an express trust established whereby either Mr Deans held his shares in TRHS as to 50% in trust for Mr Galati or, in the alternative, that TRHS held the Felan’s Fisheries’ shares as to 50% on trust for Mr Galati. That submission challenged the judge’s finding that there was no such agreement. As the submissions continued, the exercise of the call options on 20 November 2015 “necessarily implies that the purpose of the joint venture had not failed but was (at that time) continuing”. ^[9] Accepting that to be so, it does not follow that property acquired in the course of the joint venture and placed in the ownership of one person, with an expectation that it would be deployed for the purposes of the redevelopment, was agreed to have been the subject of an express trust with the relevant interests of the parties identified. The judge found there was no such agreement, a finding which must be accepted.

     9. Appellant’s written submissions, 21 June 2022, par 27.

129. In the alternative, the appellant contended that, upon the failure of the joint venture, property acquired as a collateral benefit in the course of carrying out the joint venture, would be held by the legal owner on a constructive trust for each of the joint venturers in equal shares, in the absence of any agreement to the contrary. On this approach, the judge’s finding that “the joint property seems to me to be the option rights”^[10] started with the proposition that the option rights were joint venture property immediately prior to the exercise of the option. The nomination of TRHS as the purchaser of the shareholdings in circumstances where the whole of the consideration was provided by the joint venturers, with finance provided by ECJ, was said to rebut any implication that TRHS was intended to be the beneficial owner of the shares. The arrangement between ECJ and the joint venturers meant that the funds obtained from ECJ were for the benefit of the joint venturers and ECJ obtained no interest by way of a resulting trust in the property on which the funds were expended and which it did not seek to acquire. However, the moneys applied by the joint venturers to the purchase of the shareholding provided a foundation for a resulting trust of the property held by TRHS.

     10. Primary judgment at [575].

130. The respondent’s written submissions noted that the primary submissions of the appellant did not address authority, nor the requirements for the imposition of a constructive trust in respect of a breakdown of a relationship without attributable blame. The submissions continued: ^[11]

“The requirements were set out in Muschinski v Dodds ^[12] by Deane J, with whom Mason J agreed, and were approved in Baumgartner v Baumgartner ^[13] by Mason CJ, Wilson and Deane JJ who stated that ‘the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.’”

11. Respondent’s written submissions, 17 August 2022, par 44.

12. (1985) 160 CLR 583 at 620; [1985] HCA 78.

13. (1987) 164 CLR 137 at 148; [1987] HCA 59.

131. The respondent suggested that the necessary elements for the imposition of a constructive trust had not been pleaded, were not argued at trial but, in any event, did not exist. They did not exist, it was submitted, because Mr Galati had destroyed the substratum of the joint relationship, which had not failed without attributable blame. Further, it was suggested that as the Dahua options had been brought in by Mr Deans it would not be unconscionable for him to retain ownership of the product of the options.

132. The trial judge did not accept that the relationship had been destroyed by Mr Galati. True it was that he had sought to retain for himself a commission obtained from ECJ for arranging the finance, but the judge accepted that at the time the commission was obtained, the joint venture remained on foot. It was therefore on foot when the option was exercised. It was also true that both parties were unhappy with the performance of the other, but in fact the venture did not fail for that reason, but because the redevelopment did not go ahead.

133. By a notice of contention, the respondents submitted that there was “no pleaded claim for breach of fiduciary duty”. However, it is clear that the case run at trial depended upon the existence of a fiduciary duty owed by each party to the other and that allegations as to its breach went to the heart of the matter. So much appears from the discussion in the judgment at [616]-[620] set out above. As the appellant submitted in his reply, the imposition of a constructive trust over the Felan’s Fisheries’ shares as a remedy for breach of fiduciary duty was canvassed in submissions and addressed by the judge at [587], set out above.

Determination of claim

Express trust

134. Although, as noted below, the appellant’s case was put in various ways at different stages of the appeal, the first claim posited an express trust. However, as noted above, I agree with the trial judge that no such declaration of trust can be found on the evidence. The judge’s conclusion that the parties at that time of acquisition in the name of TRHS gave no consideration to beneficial interests in the shares, because they did not then need to, is persuasive. I am not satisfied that the court should uphold an express trust.

Resulting trust

135. The second way it was put in oral submissions was a claim for a resulting trust where the underlying purpose for which the property was acquired had failed. After addressing the submission that there was an express trust, senior counsel for the appellant continued: ^[14]

“The second way we put the argument is a resulting trust….

Let it be assumed that there is simply insufficient evidence for an inference to be drawn that there is an express trust of the kind that we seek, and on that assumption there’s not a basis to draw an inference of an express trust. There is, in our submission, at that point a presumption that TRHS was intended to hold the shares on trust for Trading Australia and Fishbank, and that’s because the nomination of TRHS was in substance a transfer of those shares to TRHS for no consideration. It wasn’t in form a transfer, but equity [is] not normally troubled by that. It was in substance a transfer of the shares from where they would have sat, Trading Australia and Fishbank Development, to where they ultimately sat, TRHS for no consideration.”

14. CA Tcpt, p 16(28).

136. In Wirth v Wirth ^[15] Dixon CJ stated at [235]:

“Where a purchase was made in the name of a stranger who provided none of the purchase money the law was clear from a very early time that a resulting trust was presumed and the stranger could take beneficially only if he proved affirmatively that it was so intended.”

The exercise of a power of nomination in an option works in relevantly the same manner as a transfer without consideration passing from the purchaser.

15. (1956) 98 CLR 228; [1956] HCA 71.

137. Counsel referred to Napier v Public Trustee (WA),^[16] where Aickin J stated (with the agreement of Gibbs, Mason, Murphy and Wilson JJ):

“The law with respect to resulting trusts is not in doubt. Where property is transferred by one person into the name of another without consideration, and where a purchaser pays the vendor and directs him to transfer the property into the name of another person without consideration passing from that person, there is a presumption that the transferee holds the property upon trust for the transferor or the purchaser as the case may be.”

The presumption may be rebutted, but there was no relevant basis for rebuttal on the evidence in the present case.

16. (1980) 55 ALJR 1 at 3F, col 2.

138. The trial judge correctly emphasised that the joint venture between Fishbank and Trading Australia conferred benefits on the parties according to the outcome of the development. The judge was correct to emphasise that the purpose of the joint venture was a completed redevelopment of the Sydney Fish Market site. From that it was readily inferred that the parties gave no thought to the beneficial ownership of property obtained in the course of carrying out the venture. The value to the joint venture of ownership of the Felan’s Fisheries’ shares was the opportunity, as the judge noted, to influence SFM in its consideration of any proposal for redevelopment of the site. For that reason, it was deemed expedient by Mr Deans and Mr Galati that the public record would not disclose their control of the relevant shares. As senior counsel for the appellant submitted, if the purpose of the nomination of a third party to hold the shares was to conceal the true ownership, the underlying premise was that Mr Deans and Mr Galati had a common interest in the shares that needed to be concealed. It was concealment of that interest, rather than an intention to transfer ownership of the shares from one person to another, that underlay the nomination of TRHS to hold the shares. ^[17]

     17. CA Tcpt, 20/09/22, p 12(5)-(10).

139. That inference was supported by the fact that Mr Deans and Mr Galati agreed that each should nominate one director to the board of TRHS. That occurred, on 23 November 2015 (three days after the Nomination Agreement was executed – see below), each naming a person who, it seems, was not directly associated with his business. ^[18]

     18. Primary judgment at [252], [272].

140. A further factor relied upon by the appellant was the fact that the options granted by Dahua No 1 and Dahua No 2 each identified Fishbank and Trading Australia “together” as the buyer or grantee of the option. They, together, were given the power to nominate another person to become the registered owner of the shares but they would remain liable for completing their obligations under the option, regardless of any act or omission of the nominee. It was for that reason that the judge identified the holding of the option as relevant joint venture property, rather than the shares the subject of the option.

141. Fishbank and Trading Australia entered into a “Nomination Agreement” with ECJ on 20 November 2015 with respect to the purchase of the Bidvest Land. Pursuant to that agreement, they nominated the property purchaser, EJC. That deed was relevant for two reasons. First, it confirmed that as at 20 November 2015, Fishbank and Trading Australia were acting jointly in pursuit of the joint venture. Secondly, it provided for the nomination of EJC as the purchaser of the Bidvest Land, but not of the shares. The deed identified the “Share Purchaser” as “[t]he person/s whom the Grantee nominates pursuant to the Share Option Deed to be the buyer of the Shares, or where the Grantee does not make a nomination, the Grantee”. That aspect was relied upon by the appellant to rebut any suggestion that EJC was entitled to hold the shares on a resulting trust, in the event that the development did not occur. It also provided support for the inference that the funds obtained by the joint venturers would be used by them to purchase, in whatever name they thought fit, the shareholding the subject of the Dahua No 2 option.

142. There was evidence that the money provided by EJC to the joint venturers was made available by them by way of a loan to TRHS for payment to Dahua No 2. That inference was derived from the existence of a loan agreement and a “General Security Deed”, the latter being executed by Mr Deans on behalf of Fishbank, by Mr Galati on behalf of Trading Australia and by Andrew Schultz, identified as the sole director and secretary of TRHS; the deed was dated 20 November 2015. The deed was said to give security for payment of amounts owing by TRHS to “the Secured Party”, the latter being identified as Fishbank and Trading Australia. The joint venturers were described as the “lender” and TRHS as the “borrower”. TRHS was able to obtain legal title to the shares, as a result of the provision of funds by the joint venturers.

143. It is true that generally a third-party financier will not obtain an equitable interest in a property purchased with funds it lends to the purchaser. However, the joint venturers were not third-party financiers but the parties entitled to purchase the property pursuant to the option agreement with the vendor. The fact that in exercising the option they nominated a third party (which one of them controlled) to which they supplied the funds to complete the purchase, for the acknowledged purpose of concealing their interests, provides an analogous situation to that of the purchaser who provides no consideration for the transfer.

144. The appellant noted the reasoning of the trial judge, adopted by the respondent, at [616] (set out above in full) that by mid-2015 Mr Galati believed that the parties “had finished as a team”, so that “there is no reason for the holding of the shares as property for a joint venture the underlying premise of which has failed.”

145. Accepting for the purpose of argument the factual premise that Mr Galati believed that the joint venture had collapsed in mid-2015, the appellant submitted that it would be absurd to infer that, some five months later, Mr Galati was content to abandon a significant asset of the joint venture, namely the option to purchase the shares, by making a gift to Mr Deans. Further, the appellant submitted that this involved a misunderstanding of the reasoning of the trial judge, because the judge found that in late 2015 Mr Galati was in breach of his fiduciary duty in retaining the commission paid by ECJ which constituted an asset of the joint venture.

146. The fact that, in November 2015, the Nomination Agreement with ECJ expressly provided for a payment of 10% of the net profit of the redevelopment to the joint venturers supports the inference that the arrangement with ECJ was intended to be part of the joint venture, but that no thought was given to the beneficial ownership of the shares in Felan’s Fisheries, should the project collapse. The shares were not being acquired in order to operate stalls at the fish market; rather, they were being acquired so that they could be used by the joint venturers to promote the proposed redevelopment. Consistently with the principles stated in Muschinski v Dodds, affirmed in Baumgartner, this was a case in which a joint venture collapsed leaving one party as the legal owner of a major asset, in circumstances where it would be unconscionable for the legal owner to deny any beneficial interest on the part of the other joint venturer.

147. As a further element of joint activity, in 2015 Mr Galati and Mr Deans each nominated a director of TRHS. On 26 February 2016 the director of TRHS nominated by Mr Galati was removed, at Mr Deans’ instigation. ^[19] That left Mr Deans in sole control of TRHS. Although in a legal sense TRHS may have held 50% of the beneficial interest in the Felan’s Fisheries shareholding for Fishbank, as that was also a Deans’ company, nothing turned on that in a practical sense. However, TRHS having obtained the shareholding with funds provided by the joint venturers, it should be declared that it holds those shares on trust for the joint venturers equally.

Common intention constructive trust

19. Primary judgment at [411]-[414].

148. A third possible approach, raised by the Court in the course of argument and adopted by the counsel for the appellant in reply, was that the Court could find a “common intention constructive trust”. The basis for such a trust is said to derive from principles found in such cases as Grant v Edwards ^[20] and Green v Green. ^[21] The relevant elements were set out by Ward CJ in Eq in Bassett v Cameron,^[22] where the Chief Judge further identified a claim based on a joint enterprise which failed, as seeking “to invoke the so-called ‘joint endeavour’ constructive trust of the kind identified in Baumgartner at 148, namely, where equity intervenes to restore to a party ‘contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them’.”^[23]

     20. [1986] 6 Ch 638.

     21. (1989) 17 NSWLR 343.

     22. [2021] NSWSC 207 at [564]-[565].

     23. Ibid at [567].

149. However, as explained by White J in Shepherd v Doolan,^[24] the existence of an agreement or “common intention” referrable to the beneficial enjoyment of the property is one to be determined on the evidence. In my view, such a determination in the present case would be inconsistent with the findings of fact made by the trial judge as to which the appellant eschewed any challenge. The law does not impute a presumed intention. ^[25] Further, it is said that the claimant must demonstrate that it acted to its detriment in reliance upon the common intention, although “a less stringent test applies to the requirement of detriment once the common intention has been established”. ^[26] That element supports the doubts expressed by Leeming JA in Bijkerk Investments v Bikic, ^[27] noted by this Court in Koprivnjak, as to whether there is available under Australian law a “common intention constructive trust” which may be found in circumstances where no estoppel arises. In the present case, the trial judge expressly rejected a claim in estoppel^[28] and the appellant eschewed any reliance on estoppel at the hearing of the appeal. ^[29]

     24. [2005] NSWSC 42 at [37].

     25. Shepherd at [34].

     26. Koprivnjak v Koprivnjak [2023] NSWCA 2 at [24(3)] (Griffiths AJA, Leeming and Mitchelmore JJA agreeing) citing Green v Green (1989) 17 NSWLR 343 at 357 (Gleeson CJ, Priestley JA agreeing).

     27. [2020] NSWSC 1336 at [116]ff.

     28. Primary judgment at [621].

     29. CA Tcpt, p 21(44).

148. Once it is accepted that the ultimate provider of the funds, ECJ, disclaimed any interest in obtaining the shares, pursuant to the Nomination Agreement, the relevant source of funds was the joint contribution of the joint venturers, who were otherwise entitled to obtain the transfer of the property to themselves on payment to the seller.

149. In these circumstances, the appellant’s claim to a 50% interest in the shareholding in Felan’s Fisheries transferred to TRHS should be accepted. There should be a declaration to that effect.

Conclusion

152. I agree with the reasons of White JA with respect to other matters raised by the appellant. Accordingly, the orders proposed by White JA should be made.

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Endnotes

Amendments

20 February 2023 - Typo in citation par [6] corrected

Decision last updated: 20 February 2023