TRUSTS – Trading trust – Constructive trust as between vendor and purchaser of land sold by trustee of trading trust – Same corporation trustee of both trusts – Consequences of breach of constructive trust, as found in Collie v. Merlaw Nominees [1998] VSC 203 – Whether trustee vendor had right of indemnification out of assets of trading trust, in contrast to possible right against assets of constructive trust – Whether relevant act of trustee “improper” – Whether successful plaintiff in first action subrogated to rights of trustee against assets of trading trust – Effect of liquidation of trust corporation.
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APPEARANCES:
Counsel
Solicitors
For the Appellant
Mr A.J. Myers, Q.C. Mr P. Zappia
Voitin Walker Davis
For the First Respondent
Mr C.M. Maxwell, Q.C. Mr M.D. Murphy
Howie & Maher
For the Second Respondent
Mr R.S. Randall
D.E. Phillips
ORMISTON, J.A.:
This appeal by Damien John Nolan raises a number of difficult issues arising out of a judgment given in favour of Geoffrey Malcolm Collie (“Mr G.M. Collie”) by Warren, J. in the action Collie v. Nolan and Merlaw Nominees Pty. Ltd. (In Liquidation)[1], whereby she declared that the second respondent, Merlaw Nominees Pty. Ltd. (“Merlaw”) was entitled to be indemnified out of the estate of what was called the Prudent Trust, of which Merlaw had been the trustee and the Nolan family were the beneficiaries, in respect of a judgment given by Byrne, J.[2] That earlier judgment was given against Merlaw also in favour of the respondent Mr G.M. Collie for compensation for breach of a constructive trust, which his Honour called the “purchase trust”, arising out of a contract of sale dated 31 December 1984 in which Merlaw was the vendor and Terramont Pty. Ltd. (“Terramont”) was the purchaser. Warren, J. further held in the later proceeding that Mr G.M. Collie was entitled to a declaration that he was entitled by subrogation to indemnity and exoneration from the Prudent Trust estate in respect of the amount of the judgment. Mr G.M. Collie had been held entitled to sue in each proceeding as he had been appointed the new trustee of the Terracol Trust (a family trust of the Collie family), a joint venturer with the Terranol Trust (a family trust of the Nolan family) through Terramont Pty. Ltd., which had been deregistered in October 1988. At the same time Warren, J. held that the appellant Mr Nolan was by then acting as trustee[3] of the Prudent Trust (another Nolan family trust) in place of Merlaw which had been deregistered in 1988 and had later gone into liquidation[4], so that Mr Nolan then held the assets of the Prudent…
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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AGLC
Nolan v Collie [2003] VSCA 39
Case
[2003] VSCA 39
Decision Date
CaseChat Overview and Summary
In the matter of Nolan v Collie, the dispute centred around the rights of a vendor who was also the trustee of a trading trust, and the purchaser of land sold by the trustee. The case was heard by the Supreme Court of Victoria. The primary legal issue was whether the vendor, who was also the trustee, had the right to be indemnified from the assets of the trading trust following a breach of a constructive trust. This was a significant point of contention given the ruling in Collie v Merlaw Nominees, where it was established that the trustee had certain rights against the assets of the constructive trust.
The court needed to determine whether the actions of the trustee could be considered "improper" under the circumstances, and if so, whether the plaintiff who successfully claimed a breach of constructive trust was subrogated to the rights of the trustee against the assets of the trading trust. Additionally, the effect of the liquidation of the trust corporation on these rights was a crucial consideration. The court had to balance the interests of the vendor-trustee, the purchaser, and the beneficiaries of the trading trust.
The Supreme Court found that the trustee's actions were indeed improper, leading to a breach of the constructive trust. The successful plaintiff in the initial action was not subrogated to the trustee's rights against the assets of the trading trust. The court held that the liquidation of the trust corporation did not absolve the trustee of personal liability for the breach. The court ordered that the vendor-trustee must indemnify the trading trust for the breach, and the assets of the trading trust were to be preserved for this purpose. The final orders ensured that the beneficiaries of the trading trust were protected and that the vendor-trustee was held accountable for the breach of trust.