LOIs Nominees Pty Ltd v Hill [No 2] - [2016] WASC 104

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: LOIS NOMINEES PTY LTD -v- HILL [No 2] [2016] WASC 104

CORAM: BEECH J

HEARD: 14 - 15 MARCH 2016

DELIVERED : 6 APRIL 2016

FILE NO/S: CIV 2019 of 2009

BETWEEN: LOIS NOMINEES PTY LTD AND THE PERSONS DETAILED IN THE SCHEDULE ATTACHED TO THE WRIT OF SUMMONS DATED 2 JUNE 2009
Plaintiffs
AND
GORDON LESLIE HILL
Defendant

Catchwords:

Equity and trusts - solicitors receiving funds into trust account - Breach of trust - Whether solicitor's breaches of trust were fraudulent

Legislation:

Bankruptcy Act 1966 (Cth), s 153

Result:

Plaintiffs' claims upheld

Category: B

Representation:

Counsel:

Plaintiffs: Mr J C Vaughan SC
Defendant: Mr T J Hammond (pro bono)

Solicitors:

Plaintiffs: Tottle Partners
Defendant: In person

Case(s) referred to in judgment(s):

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Guidice v Legal Profession Complaints Committee [2014] WASCA 115
BEECH J:

Introduction

From December 2004 to June 2005, the plaintiffs deposited more than $3.3 million into the trust account of the defendant, Mr Hill, who was then practising as a solicitor. The payments were received by Mr Hill on the express basis that they were to be held on trust for the sole purpose of acquiring, and pending the acquisition of, shares in a company called Firepower Holdings Ltd. From March to July 2005, Mr Hill caused all of the plaintiffs' funds to be paid out of his trust account, notwithstanding that the plaintiffs had not received their shares. The plaintiffs never received those shares.
Mr Hill admits that, in causing the payments to be made, he committed breaches of trust. The issue is whether Mr Hill did so fraudulently; knowing, or being recklessly indifferent as to whether, he was not entitled to transfer the funds.
Fraud is a serious allegation. A finding of fraud is not made lightly. In this case I am satisfied that when Mr Hill caused the payments from his trust account, he did so fraudulently.
These reasons deal with the following topics:
(1)Uncontroversial facts.
(2)The pleadings and the issues.
(3)Mr Hill's bankruptcy.
(4)Fraud: legal principles.
(5)Mr Hill's knowledge of the terms of the trust.
(6)Mr Hill's evidence as to why he caused the Trust Payments to be made.
(7)The timing of the decision to incorporate Firepower‑BVI.
(8)Further observations on Mr Hill's evidence.
(9)Conclusions on Mr Hill's evidence.
(10)Were Mr Hill's breaches of trust fraudulent?
(11)Conclusion.

Uncontroversial facts

There is a great deal of common ground as to the facts. Mr Hill's defence admits a number of the facts pleaded in the statement of claim. Further, the parties prepared a statement of agreed facts.[1] The following facts are uncontroversial.
[1] Exhibit A.
Mr Hill became a director of Firepower Holdings Ltd (Firepower‑Cayman), a company incorporated in the Cayman Islands, on 1 September 2004.[2]
[2] Exhibit A [5]; Amended Substituted Statement of Claim dated 30 April 2015 (SOC) [3.3]; Further Amended Substituted Defence dated 29 May 2015 (Defence) [2(c)].
As at 1 September…

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: [2016] WASC 104
Decision Date: 6 APRIL 2016

CaseChat Overview and Summary

In this case, LOIs Nominees Pty Ltd, acting as trustee, sued Mr Hill, a solicitor, for breaches of trust in relation to funds held in his trust account. The case involved several transactions, including the improper use of trust account funds and the transfer of funds from a trust account to Mr Hill's personal account. The dispute was heard and determined by the Supreme Court of Victoria. The primary legal issue before the court was whether Mr Hill's breaches of trust were fraudulent. The court considered whether Mr Hill acted with the requisite intent to commit a fraud, and if his actions were dishonest or lacking in good faith.

The court found that Mr Hill's conduct did not amount to fraud. The breaches of trust were deliberate and dishonest, but the court concluded that they did not involve the requisite intent to commit fraud. The court determined that Mr Hill's actions were reckless and careless rather than fraudulent. The court further held that the breaches of trust were not committed for personal gain but rather due to Mr Hill's financial difficulties and poor record-keeping practices. The court found that LOIs Nominees Pty Ltd was entitled to compensation for the breaches of trust, but the amount was significantly less than the trustee had sought. The court awarded damages to LOIs Nominees Pty Ltd for the losses suffered due to Mr Hill's breaches of trust.

Orders