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Harstedt Pty Ltd v Tomanek

Harstedt Pty Ltd v Tomanek

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Case Copied 10 April 2018 61 min read

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2017 0080

HARSTEDT PTY LTD (ACN 078 656 630)	Applicant
v
MARIJAN TOMANEK	Respondent

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JUDGES:	SANTAMARIA, McLEISH and NIALL JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	20 March 2018
DATE OF JUDGMENT:	10 April 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 84
JUDGMENT APPEALED FROM:	[2017] VCC 834 (Judge Macnamara)

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TRUSTS AND TRUSTEES – Breach of trust – Knowing assistance – Where corporate trustee committed fraudulent breach of trust – Where director of corporate trustee held liable as knowing assistant under second limb of Barnes v Addy (1874) 9 Ch App 244 – Where trial judge dismissed claim against another third party – Whether third party assisted trustee with knowledge of trustee’s dishonest and fraudulent design.

EQUITY – Accessorial liability – Knowing assistance – Requirement of knowledge – Categories of knowledge and effect of consent – Whether dishonesty by third party an element of knowing assistance – Whether third party had knowledge of essential facts constituting breach of trust – Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 applied.

EQUITY – Accessorial liability – Knowing assistance – Requirement of assistance – Where beneficiary alleged active involvement by third party – Whether third party assisted in dishonest and fraudulent design – Whether third party’s conduct facilitated breach of trust – Where no evidence of active involvement – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr D G Robertson QC with Ms R T Campbell	Katherine Moorhouse Perks
For the Respondent	Mr D G Collins QC with Mr A M Donald	Bowman & Knox

SANTAMARIA JA
mcLEISH JA
NIALL JA:

Introduction

This appeal arises out of a failed investment scheme known as a private placement program. Under the scheme, investors were promised profits which were to be generated by the investment of capital by a humanitarian organisation. The applicant, Harstedt Pty Ltd (‘Harstedt’), sought to invest in the scheme and deposited the sum of $250,000 into an account in the name of Apollo Development Enterprises Pty Ltd (‘Apollo’). The account was described as a ‘non-depleting account’; funds were to be held inviolate and were not to leave the account. Other investors also deposited funds into the account. Several months later, a director of Apollo and another investor arranged for the funds in the account, including the sum deposited by Harstedt, to be transferred to an account in Spain that was not in the name of Apollo. The funds were transferred without Harstedt’s knowledge or consent. In the event, the funds vanished without a trace.

Harstedt commenced a proceeding in the County Court against Apollo and others including the respondent, Mr Tomanek, who was the secretary of Apollo. Harstedt contended that Apollo had committed a fraudulent breach of trust by transferring the funds deposited by Harstedt overseas into an account not in the name of Apollo. Relevantly, it also contended that Mr Tomanek was liable as a knowing assistant under the second limb of Barnes v Addy

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2018] VSCA 84
Decision Date: 10 April 2018

CaseChat Overview and Summary

Harstedt Pty Ltd, a beneficiary of a trust, sought to hold Tomanek, a director of the corporate trustee, liable for knowingly assisting in a breach of trust. The dispute arose out of fraudulent activities by the corporate trustee, which led to the beneficiary's losses. The matter was determined by the High Court of Australia. The central legal issues were whether Tomanek was a knowing assistant to the trustee's fraudulent breach of trust under the second limb of Barnes v Addy, and whether the trial judge was correct in dismissing the claim against another third party. The Court needed to determine the requisite knowledge and involvement for accessory liability under equity.

The Court examined the elements required for liability as a knowing assistant in a breach of trust. It was established that the assistant must have knowledge of the essential facts constituting the breach of trust. The Court considered the categories of knowledge required and whether mere consent or actual knowledge was necessary. It noted that dishonesty by the third party was not an element of knowing assistance. Applying Farah Constructions Pty Ltd v Say-Dee Pty Ltd, the Court assessed whether Tomanek had knowledge of the trustee’s fraudulent design and whether his actions facilitated the breach. The Court found that while the beneficiary alleged active involvement by Tomanek, there was insufficient evidence to establish that Tomanek had the necessary knowledge or actively assisted in the trustee’s fraudulent scheme.

The Court concluded that the trial judge's dismissal of the claim against Tomanek was correct, as there was no evidence to support that Tomanek had the requisite knowledge of the essential facts or actively assisted in the trustee's fraudulent actions. The Court upheld the dismissal of the appeal, affirming the trial judge's findings. The decision underscores the stringent requirements for establishing accessory liability in cases of breach of trust, emphasising the need for clear evidence of both knowledge and active assistance.

Orders