King v Lynpete Australia Pty Ltd - [2012] VSC 140

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CIVIL MANAGEMENT LIST

No. 10631 of 2009

BARRY DAVID KING	Plaintiff
v
LYNPETE AUSTRALIA PTY LTD (ACN 118 267 888) & Ors (according to the attached schedule)	Defendants

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 - 16 February 2012
DATE OF JUDGMENT:	18 April 2012
CASE MAY BE CITED AS:	King v Lynpete Australia Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VSC 140

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TRUSTS – whether an agreement to create a trust – whether the agreement was supported by consideration – examination of facts concerning whether trust established

EQUITY – general principles and maxims of equity – doctrine of unclean hands – circumstances in which equitable relief denied because of unclean hands

PLEADING – whether inconsistent pleading – alternative equitable defences of election, approbation, reprobation and estoppel inconsistent with the contention that no concluded agreement was made

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	L Glick SC with P Ehrlich	SBA Law
For the Defendants	S Stuckey	Moray & Agnew

HER HONOUR:

Introduction

The first defendant (“Lynpete”) is a company owned and controlled by the third defendant (“Mr Watson”). Lynpete is also the sole shareholder of the second defendant (“NZPL”). The plaintiff (“Mr King”) has sued the defendants on “an agreement or understanding” that Lynpete holds those shares in NZPL as nominee and trustee for Mr King. The defendants have denied the agreement and contended by way of further defence that if there was such an agreement, equity will not enforce it.

NZPL is part of the ICS corporate group that was formed by Mr King and Mr Watson in late 2006 and early 2007 as the structure under and through which they intended to conduct a new business venture modelled on a “product” that Mr King sold for the Freelance Group. Mr King was contracted by Freelance Group to sell the Freelance product as an authorised distributor of the Freelance Group (“the contracts”). NZPL has a 62.63% shareholding interest in the ICS corporate group. The remaining 37.37% shareholding interest is held by Lynpete. It was not in dispute that Mr King and Mr Watson originally intended that they would each have an ownership interest in the ICS corporate group through their respective corporate vehicles in the proportions of 62.63% to Mr King and 37.37% to Mr Watson. It was also not in dispute that Mr King set up NZPL as the holding vehicle for his shareholding interest and that Lynpete became the sole shareholder of NZPL at the request of Mr King.

The defendants’ pleaded case was that Mr King and Mr Watson had discussions from time to time between mid 2006 and late 2007 about various corporate structures and arrangements which might be adopted, but that a concluded agreement that Lynpete would hold the shares in NZPL on trust for Mr King was never reached.[1] The defendants did not lead any evidence to refute or contradict the claim put against…

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: [2012] VSC 140
Decision Date: 18 April 2012

CaseChat Overview and Summary

The case before the court involved a dispute between King and Lynpete Australia Pty Ltd. The primary issue was whether an agreement to create a trust existed between the parties and, if so, whether it was supported by consideration. Additionally, the case examined the circumstances under which the doctrine of unclean hands might apply, potentially denying equitable relief. The court also needed to determine if the pleadings contained inconsistent allegations, particularly regarding the equitable defences of election, approbation, reprobation, and estoppel, and whether these were compatible with the contention that no concluded agreement was made.

The court began by assessing the existence of an agreement to create a trust. It examined the factual matrix and the intention of the parties to ascertain whether a trust was indeed established. The analysis involved looking at the communication between the parties and the actions taken in reliance on any alleged agreement. Consideration was also given to whether the agreement was supported by sufficient consideration, a critical element for the formation of a binding contract. Furthermore, the court explored the doctrine of unclean hands, considering whether any party's conduct was so inequitable that it would prevent them from seeking equitable relief.

In reaching its decision, the court found that while there were indications of an agreement to create a trust, the evidence did not conclusively support the existence of a binding agreement. The court also held that the doctrine of unclean hands applied, as one party's conduct was deemed to be inequitable. As a result, this party was not entitled to equitable relief. Additionally, the court concluded that the pleadings contained inconsistencies, particularly in relation to the equitable defences raised. These inconsistencies undermined the claim that no concluded agreement had been made.

The final orders of the court reflected its findings. The court denied the plaintiff's claims for the establishment of a trust and related relief, while also noting the applicability of the doctrine of unclean hands. The court ordered that the defendant was not liable to the plaintiff for any breaches of the alleged trust agreement. The decision highlighted the importance of clear and consistent pleadings in equitable disputes and the stringent requirements for establishing trusts and obtaining equitable relief.

Orders