Literski v Fresh 2 U Pty Ltd - [2013] VSC 307

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

No. SCI 2012 03824

GEOFFREY GRANT LITERSKI	Plaintiff
V
FRESH 2 U PTY LTD & ORS	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	27-29 May 2013
DATE OF JUDGMENT:	14 June 2013
CASE MAY BE CITED AS:	Literski v Fresh 2 U Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2013] VSC 307

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TRUST AND TRUSTEES – Misconduct and breaches of duty by trustee of trading trust – Relevance of knowledge of unitholders.

TRUSTEE – Whether removal is appropriate remedy in the circumstances – Removal ordered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D G Robertson	Mahons with Yuncken & Yuncken
For the Defendant	Mr D Baker	George Liberogiannis & Associates

HIS HONOUR:

A. Introduction

Fresh 2 U Pty Ltd (“the Company”) is and was at all relevant times trustee of the Fresh 2 U Trust (“the Trust”). The plaintiff (“Literski”) holds 20 per cent of the units in the Trust. He is not and was never a director of the Company. Demarte Pty Ltd holds the other 80 per cent. Vincenzo Demarte (“Vince”) is and was at all relevant times a director of the Company and Demarte Pty Ltd. His wife, Mara, is and was at all relevant times a director of the Company.

For many years, the Company, in its said capacity, operated a wholesale fruit and vegetable market business called Fresh 2 U (“the Business”).

On 14 November 2011 and pursuant to a written agreement (“the Sale Agreement”), the Company sold the Business to H & A Fresh Family Pty Ltd (“the Purchaser”). The Sale Agreement was varied and ultimately settlement took place on 23 March 2012 for a purchase price lower than that stated in the Sale Agreement. A number of side agreements were entered into at settlement.

Literski alleges that in conducting the sale and thereafter (and indeed before), the Company as trustee (“the Trustee”) failed to act properly and in the best interests of the Trust in a number of respects. He seeks declaratory relief in relation to certain assets of the Trust and the removal of the Trustee for misconduct. Other related and ancillary relief is claimed against the Company and against Vince and Mara as participants in the breach of duty. These matters have not presently been fixed for trial.

The breaches are denied by the Trustee, Vince and Mara.

B. Relevant Factual Background
Diversification of the Business into Retail Sales

Prior to 2009 the Business operated as a wholesale fruit and vegetable business with a range of wholesale clients including hotels, schools, retailers and supermarkets.

In 2009 the Business decided to begin offering retail sales of its fruit and vegetables to domestic households and offices. Such sales would occur by the delivery of boxes of fruit and vegetables to such customers. To promote these new business divisions, two business names were registered — “It’s Fresh Home Deliveries” was registered in…

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: [2013] VSC 307
Decision Date: 14 June 2013

CaseChat Overview and Summary

The case of Literski v Fresh 2 U Pty Ltd concerned a dispute over the management and operation of a trading trust. The plaintiff, Literski, was a unitholder in the trust, while the defendant, Fresh 2 U Pty Ltd, was the trustee. The plaintiff alleged that the trustee had engaged in misconduct and breached their fiduciary duties, which had adversely affected the trust and its unitholders. The dispute ultimately reached the court, which was tasked with determining whether the trustee had indeed breached their duties and, if so, what appropriate remedies were available.

The primary legal issue before the court was whether the trustee had breached their fiduciary duties in managing the trust. Specifically, the court had to consider whether the trustee's actions constituted misconduct or breaches of duty, and if the unitholders' knowledge of the trustee's conduct was relevant to this determination. Additionally, the court needed to assess whether the removal of the trustee was an appropriate remedy in these circumstances.

In delivering its judgment, the court found that the trustee had indeed breached their fiduciary duties through misconduct and breaches of duty. The court emphasised that the trustee's actions had caused significant harm to the trust and its unitholders. Regarding the relevance of unitholders' knowledge, the court held that this factor did not mitigate the trustee's liability for their breaches. The court concluded that the trustee's misconduct warranted their removal from office, and it ordered that the trustee be removed from their position. The court also noted that the trustee's removal was necessary to protect the interests of the trust and its unitholders.

Orders