Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118 Hearing dates: 12 March 2018 Decision date: 07 June 2018 Before: Leeming JA at [1];
Sackville AJA at [94];
Emmett AJA at [100]Decision: 1. Appeal allowed in part.
2. Set aside order 1 made on 7 April 2017 in proceeding 2014/317554, and in lieu thereof, order that there be judgment in favour of the plaintiffs against the first and second defendants.
3. Direct the parties to file and serve within 21 days (a) agreed short minutes of order, or, in default of agreement, (b) the orders for which they contend and short submissions in support as to (i) the amount of the judgment debt, (ii) the appropriate order as to costs in this Court, and (iii) and further orders which should be made.Catchwords: CORPORATIONS ACT - claim in equity against third parties involved in director’s dishonest and fraudulent breach of duty - whether claim limited by analogy with 6 year limitation period under Corporations Act 2001 (Cth) s 1317K against persons involved in breach of directors’ duties under s 79 of that Act
EQUITY - fiduciary duty - Barnes v Addy claim for knowing receipt - money taken from client account and used to contribute to purchase price of property - liquidator contended money taken from company in breach of duty - no error in finding by primary judge that money borrowed from client - no claim for breach of duty owed to client pleaded
EQUITY - fiduciary duty - Barnes v Addy claim for knowing assistance - fraudulent scheme by director to create appearance that his personal indebtedness to the company had been repaid - scheme involved dishonestly created letter referring to commercial opportunity, the creation of companies unbeknownst to their directors, and a “round robin” of cheques - primary judge held that transactions although fraudulent had no legal effect and thus caused no loss to company - held on appeal that effect of transactions was to replace claim in debt against director by more complicated claim against third parties - consideration of direct application of limitation statute, and application by analogy in equity
LIMITATION PERIODS - definition of “trust” and “trustee” in s 11 of Limitation Act 1969 - whether limitation period of 6 years applied to Barnes v Addy claim for knowing assistance by analogy with Corporations Law s 1317K - whether direct application of Limitation Act - whether defences of laches and informed consent made outLegislation Cited: Civil Procedure Act 2005 (NSW), s 100
Corporations Act 2001 (Cth), ss 79, 180, 181, 182, 183, 1274B and 1317K,
Evidence Act 1995 (NSW), s 140
Judicature Act 1873 (36 & 37 Vict c 66)
Limitation Act 1969 (NSW), ss 11, 13, 15, 16, 17, 18, 20, 21, 23, 47, 55
Limitation Act 2005 (WA), ss 13, 47
Limitation of Actions Act 1974 (Qld), s 27
Real Property Limitation Act 1833 (3 & 4 Wm…
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- Case
- [2018] NSWCA 118
- Decision Date
CaseChat Overview and Summary
The court was required to determine several key legal issues. Firstly, it had to consider the nature of the claims brought against the third parties, specifically whether they constituted claims for knowing receipt or knowing assistance under the principles established in *Barnes v Addy*. Secondly, the court had to decide whether the six-year limitation period under section 1317K of the *Corporations Act* applied directly or by analogy to the equitable claim for knowing assistance. Thirdly, the court examined the application of the *Limitation Act 1969* (NSW), including the definitions of "trust" and "trustee" within that Act, and whether the equitable claim fell within its scope. Finally, the court considered whether defences such as laches and informed consent were made out.
The Court of Appeal found that while the primary judge had correctly determined that money was borrowed from a client account and that no claim for breach of duty owed to the client was pleaded, the primary judge erred in concluding that the fraudulent transactions had no legal effect and caused no loss to the company. The appellate court held that the effect of the transactions was to replace a direct debt claim against the director with a more complex claim against the third parties. The court considered the direct application of limitation statutes and the application by analogy in equity, ultimately allowing the appeal in part.
Consequently, the Court of Appeal set aside a previous order and entered judgment in favour of the plaintiffs against the first and second defendants. The parties were directed to file agreed short minutes of order or, in default, their contentions regarding the amount of the judgment debt, costs, and any further orders within 21 days.
Orders
Orders of the court
1. Appeal allowed in part.
2. Set aside order 1 made on 7 April 2017 in proceeding 2014/317554, and in lieu thereof, order that there be judgment in favour of the plaintiffs against the first and second defendants.
3. Direct the parties to file and serve within 21 days (a) agreed short minutes of order, or, in default of agreement, (b) the orders for which they contend and short submissions in support as to (i) the amount of the judgment debt, (ii) the appropriate order as to costs in this Court, and (iii) and further orders which should be made.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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