Pillay v Pillay

[2001] NSWSC 1161

CITATION:	Pillay v Pillay [2001] NSWSC 1161
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2963/2001
HEARING DATE(S):	30 and 31 October, 2001, 1, 2, 5, 6, 7, 16, November 2001
JUDGMENT DATE:	14 December 2001
PARTIES :	Pravin Pillay (First Plaintiff/First Cross-Defendant) Sylvia Pillay (Second Plaintiff) P & S Pillay Pty Limited (Third Plaintiff) Naveen Pillay (First Defendant/Cross-Claimant) Lynette Pillay (Second Defendant) Lauren International (Australia) Pty Limited (Third Defendant/Second Cross-Defendant)) Lauren International Pty Limited (Fourth Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	M.B. Evans (Plaintiffs/Cross Defendants) M. Scheib (Defendants/Cross Claimant)
SOLICITORS:	Beswick, Solicitors (Plaintiffs/Cross Defendants) Crichton-Browne Crossley (Defendants/Cross Claimant)
CATCHWORDS:	EQUITY - fiduciary obligations - agreement between brothers for joint venture through corporate vehicle - construction and interpretation - claims of breach of fiduciary duty - CONTRACTS - Joint venture agreement - determination of terms - CORPORATIONS - winding up - oppression
LEGISLATION CITED:	Conveyancing Act 1919, s23C, s54A Corporations Act
CASES CITED:	Breen v Williams (1995-6) 186 CLR 71 Troncone v Aliperte (1994) 6 BPR 13291
DECISION:	See paragraphs 28 and 29

- 21 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
equity DIVISION

WINDEYER J

FRIDAY 14 DECEMBER 2001

2963/01 PRAVIN PILLAY & ORS V NAVEEN PILLAY & ORS

JUDGMENT

1 This is a dispute between brothers. The respective wives are their husbands’ supporters. The dispute concerns an agreement between the brothers to conduct a business for the wholesaling of watches, through a corporate vehicle, Lauren International (Australia) Pty Ltd (Lauren No 1). The dispute concerns the terms of the agreement, claims of breach and claims of oppression in relation to the affairs of Lauren No. 1.

Parties

2 I will refer to the individual parties by the first name. Pravin Pillay (Pravin) is married to Sylvia Pillay (Sylvia), the second plaintiff. He is the brother of Naveen Pillay (Naveen) the first defendant who is, in turn married to Lynette Pillay (Lynette) the second defendant. P & S Pillay Pty Limited, the third plaintiff, is a company controlled by Pravin and Sylvia. It plays no real part in the proceedings. Lauren No. 1 is the present name of a company originally called Timekeepers Australia Pty Limited (Timekeepers) acquired to conduct the wholesale business. Lauren International Pty Ltd (Lauren No 2) is a company controlled by Naveen and Lynette. It provided the services of Naveen to a Mr Charles Spring, who was engaged in the selling of watches by wholesale. He also owned one investment property.

Terms of the Agreement

3 Naveen had been involved for some years as an agent – through his company – selling watches for a Mr Charles Spring. That engagement was to come to an end in 1999. In March or May 1999 he discussed with Pravin a plan for them to go into business together to sell watches by wholesale to retail shops. There is a dispute as to whether or not the initial conversations took place in March or May, but I consider it more likely than not they took place in May. This is based mainly upon the time at which the company, Timekeepers, was established as the venture company was set up and the evidence of Ravindra Pillay, another brother as to the time of certain conversations, which I accept. It does not really matter much for the purpose of this action whether the initial conversations took place in March or in May.

4 It is agreed on both sides that an agreement was made at least between Pravin and Naveen. Pravin contends that Sylvia and Lynette were also parties to the agreement. Apart from this Pravin says that the agreement contained the following express terms:

A. That he and Sylvia would contribute $400,000, and Naveen and Lynette $600,000 towards capital,

B. That the profits would be divided fifty-fifty,

C. That a company would be acquired with equal shareholdings between families,
D. That Naveen would be responsible for the day to day operations, that both husbands and both wives would be directors and involved to some extent,
E. That interest would be paid on moneys provided by Pravin and Sylvia for their contribution to capital,
F. That the capital would be repaid from profits within three years,
G. That the company name would be subject to subsequent agreement,
H. That cheques would require signatures of Pravin and Naveen,
I. Pravin and Sylvia would be entitled to lodge caveats against the properties of Naveen and Lynette and Lauren No. 2 to secure their contribution.

Pravin also claimed that there were in addition implied terms in the agreement that:

J. Moneys advanced would be used solely for the purpose of the business – there is no real dispute about this.
K. That Naveen would provide accounts in proper form as to the affairs of the joint venture company and the progress of the business – there is no basis for this inference although the directors must have been entitled to this information.
L. That regular meetings would be held to provide this information – there is no basis for this term being implied.

5 As against this Naveen says that the terms of the agreement were:

A. That Pravin would put in $400,000 as to $200,000 within three months and the balance as required.
B. That Naveen would be solely responsible for the business and that Pravin would merely be an investor.
C. That Naveen would be paid $50,000 a year together with the leasing and operating costs of his Mercedes motor car.
D. That the profits would be shared fifty-fifty between Pravin and Naveen.
E. That the shares would be held 25% by Pravin and 75% by Naveen – how this would fit in with equal profits with shareholdings of the same class of shares I do not understand.
F. The capital provided by Pravin would be repaid from profits after three years.
G. That the name would be chosen by Pravin and Naveen.

I will return to this to decide the terms in due course.

6 The company, Timekeepers Australia Pty Ltd was formed in May 1999. Naveen and Pravin were the directors and shareholders. They each held 400 shares. Naveen said that he did not know of the name before June. I do not accept that. Apart from anything else he signed a lease in May with the name of that company shown as lessee. His evidence on this aspect of the matter was quite unconvincing. Pravin claims that Naveen changed the name in June 1999 to Lauren International (Australia) Pty Ltd without his knowledge or consent. That was not true either. He and Sylvia attended a meeting of members of the company with the accountant when the necessary resolution was passed and forms signed to give effect to the change of name. Naveen had said that the name of Timekeepers was a security risk. That much can be accepted. He also said that he was being disturbed by phone calls to his home which commenced from about June 1999. That cannot be accepted. The number did not appear in the 1999 Yellow Pages or the White Pages. The evidence of Naveen and Lynette about people obtaining the number by ringing 013 on some basis that they were searching through to find some company dealing with time recording and the like I do not accept.

7 Over a period from July to December 1999 Pravin and Sylvia made payments to Lauren No 1 or to Naveen totalling over $180,000. It is accepted that these payments were made in accordance with the agreement to contribute $400,000 to the capital. One payment was made by a loan of $20,000 to Naveen, who repaid it by agreement to Lauren No. 1 where it was treated as a capital contribution by Pravin.

8 Naveen made no capital contributions. He said he did not agree to make any. At the time the agreement was made Naveen was not in a position to contribute $600,000 or anything like it, unless the real estate properties were sold, but Pravin did not know of this. The real estate properties or two of them were mortgaged at the time to secure about $520,000, the total value of those two properties being about $900,000. Lauren No 2 owned another property. Naveen did not have any other assets of value and once the agency with Charles Spring came to an end it seems Pravin had no income. Pravin said that Naveen had told him that he was entitled to a substantial amount for unpaid commission from Spring. I accept that he said that, but the evidence does not establish this and no recovery action has been taken.

9 The important matters upon which it is necessary to make findings of fact as to the terms of the joint venture contract are:

1. Who are the parties to the agreement?

2. Whether Naveen agreed to contribute $600,000.

3. Whether Naveen was to receive a salary of $50,000.

4. Whether interest was to be paid on Pravin’s contribution.

5. Whether there was an agreement to secure the contributions made by Pravin and Sylvia by charge upon the real estate of Naveen, Lynette and Lauren No. 2.

10 To a large extent this decision must be made on the credit of the husbands, not really on the wives. Both wives supported their husbands. They both seemed to be good women, giving much the same evidence as their husbands gave. Neither of Pravin nor Naveen was a convincing witness. Having listened to both give evidence over a lengthy period I conclude that it is difficult to accept either on contentious matters unless corroborated by another witness, not a spouse, or without some other fact supporting one version and not the other.

11 I make the following findings:

A. That the agreement was between the men only.

B. That Naveen did agree to contribute $600,000.

C. That it was agreed that Naveen would be paid $50,000 in the first year.

D. That there was no term for payment of interest.

E. That there was no term that security would be given over the real estate to secure advances of Pravin and Sylvia to Lauren No 1.

Reasons for these findings

12 While Sylvia was present at some of the discussions, and Lynette was present during part of most of them, Lynette was never to put up any money; neither wife was to be a director or shareholder, although both were nominated as signatories on the bank account. The basis for claiming that Lynette was a party to the agreement was her remaining silent during certain conversations, rather than being part of some binding contractual arrangement. The agreement was between brothers, with their wives being aware of the discussions and with it being understood that Pravin and Sylvia would need to mortgage their home to raise the funds of $400,000. In terms of a result in this action, it is really immaterial except so far as relief on the ground of oppression is claimed. This must rely upon shareholder rights in any event and the women are not shareholders.

13 So far as an agreement for contributions by Naveen is concerned, it is inherently unlikely that Pravin and his wife would borrow money secured on their family home, unless Naveen were to contribute capital as well. In addition to this, I accept the evidence of Pravin that Naveen was constantly stating first that his funds would be provided by moneys due to him by Spring and later that he would make the necessary arrangements with his bank. Evidence of Ravindra supports this and although not a very satisfactory witness, I accept him on this question. I also accept the evidence of Mr Singh that he interviewed Naveen and Lynette for the purpose of an application for loan funds secured on the properties held by them and that this was for the purpose of purchase of shares. I do not accept the evidence of Naveen and Lynette that the purpose of exploring the availability of loan funds was to consider making an investment in real estate under some development proposal put forward by Mr Singh. They might not have intended ever to proceed with an application for mortgage funds, but the stated purpose – genuine or not – was to raise funds to put into the venture. It was a term of the agreement that Naveen would put in capital.

14 It is also inherently unlikely that Naveen would devote his whole time to the project without payment. He commenced to draw cheques to the value of $1,000 a week at an early date. I find that Pravin was aware of this although he denied it. He signed some of the cheques, and admitted that some were in blank. He completed some cheque butts, he had the opportunity to inspect the cheque book to see details of payments made, and I do not accept his evidence that he did not look through them. Even after he said he expressed outrage about the payments, they continued to be made and he knew about this.

15 The conversations – which were denied by Naveen – as to offering security by way of caveat over the properties, are in my view not explicit enough to form the basis required for an agreement to give security. The evidence of Pravin as to the conversations in March relevant to the caveat was as follows:-

Naveen: Can you come up with $400,000? If you can I’ll offer you fifty percent share in the business and I’ll put in $600,000. I will also give you a caveat over my properties in Dulwich Hill and at Putney. Pravin, if the business fails I will sell my properties and pay you out and you have no worries about putting your moneys in this business because I have very good knowledge of this business of importing watches.
Pravin: In order for me to go into this business with you I will have to mortgage my home and sell my agency with AMP some time down the line to come up with the proposed $400,000. We have about $70,000 left on our mortgage and we were planning to sell and move from here. I don’t know if Sylvia will agree with me to mortgage our home.
Naveen: Don’t worry I’m mortgaging my properties as well and in three years’ time our houses will be free of debt

And the following night Naveen to Sylvia:

I even told Pravin last night that you two can place a caveat on our properties but it shouldn’t have to come to that.

Sylvia’s evidence was in precisely the same words but that was the position throughout all her first affidavit. I have found that Lynette was not party to the agreement. Even if she were, the only basis upon which it was claimed that she was party to some agreement about giving security over the properties was the fact that she heard the statement being made and did not object to it. This is not an estoppel case or a representation case. It could not be said that Lynette, by silence, agreed to give security over the property and certainly not over her interest in it. For the same reason there is no basis on which it could be found that Lauren No 2 was party to an agreement to give security over its real estate property to secure the moneys to be advanced by the plaintiffs. There is no doubt that Naveen was keen to get Pravin involved in the venture. In fact he needed capital for it, as he did not intend to put up the money which I find he had agreed to provide. He had every reason to make repayment of the moneys advanced by Pravin seem secure. I find the words were said. However, the words used were in my opinion, words of comfort rather than words of contractual import, accepted by Pravin as a term of the contract. Some time was spent on submissions as to the lack of any writing sufficient to satisfy the provisions of s23C and s54A of the Conveyancing Act 1919 . No statutory defences were pleaded in this respect but the matter was argued without objection. While it has been held that the granting of a right to lodge a caveat itself grants a caveatable interest in certain cases; see Troncone v Aliperte (1994) 6 BPR 13291, there remains a requirement of writing for this. An agreement to create an interest in land does not necessarily require writing, but this is not a claim for specific performance. It is, I think, significant that caveats were not lodged until the present dispute erupted. I find that the pleaded term was not a term of agreement.

16 As to interest, no affidavit evidence supported it. The oral evidence that Naveen agreed to pay interest at the same rate as Pravin and Sylvia were paying to the AMP Society had all the hallmarks being made up on the run. It is certain that there was no term as to interest at the time the original conversations which gave rise to the agreement took place.

Further Facts

17 It was first envisaged by the parties that an agency could be obtained for selling “Elle” brand watches, but in fact toward the end of May it was discovered that the company with whom Naveen was dealing to obtain the agency, did not have export rights into Australia. Timekeepers was incorporated on 24 May. At the commencement of June, Naveen travelled to the United States to attend a watch fair in Las Vegas, returning on 12 June. Pravin and his family travelled to the United Kingdom for a holiday at the end of June at which stage they had not received any approval for a loan on the security on their home to contribute to the business. While he was overseas Pravin says that Naveen told him that he had changed the name of Timekeepers to Lauren International Australia Pty Ltd and that he protested about this. At one stage this seemed to be a major complaint, but the clear facts establish that the name was changed by resolution of the members and the directors after Pravin returned to Australia. The necessary resolutions for the change of name were passed on 22 July 1999. The accountant arranging this was a Mr Sam Scarfone.

18 The first bank account for Lauren No. 1 was opened at the National Australia Bank at Gladesville. The authority provided that the signatures of both Pravin and Naveen be required for cheques. Over the next few months, I find there were regular statements made by Naveen about his intention to provide capital for the company and the reasons for the delays as to this, but as I have said no capital was ever put up. Naveen seemed to take the position while in the witness box that he was the company, that Pravin was an investor only, and that was the end of it. During the period from September to December withdrawals from the bank account were made with cheque butts showing that these were either consultancy fees or payments made to Naveen or to Naveen and Lynette and which would have amounted to drawings of about $1,000 per week. There is disagreement about how these cheques were signed. It is clear that Pravin signed a number of cheques in blank, although he said that when he did this he was presented with documents which showed him the accounts on which the cheques signed were owed and he assumed that the cheques would be filled in in accordance with those documents. There is no doubt that some of the cheques bore signatures purportedly to be of Pravin which were not his. It is admitted by Naveen that he signed Pravin’s name on some of these cheques. To that extent the signatures were clearly forgeries. Insofar he said that he did this with the agreement of Pravin I reject that evidence. Some of the cheques were signed by Pravin and Naveen as required, but were opened to cash and some alterations insofar as they purported to be initialled by or to bear the signature of Pravin, were forged by Naveen. Naveen again said that Pravin was aware of that, but I do not accept that evidence. I should add that there was nothing particular sinister in the opening of these cheques in that it seems that this was the accepted manner in which overseas drafts or telegraphic transfers would be obtained from the bank. Pravin says, and I accept this evidence, that in December he ascertained and was surprised at the low balance in the company’s bank account. He accordingly went to the bank and inspected the signature card and found that the requirement as originally stated on the form for two signatories had been changed to one. I find that this was done by Naveen without the authority of Pravin. The evidence of the bank officer makes it clear enough that this was the position. The bank account for the company was then changed from the National Australia Bank at Gladesville to the ANZ Bank at Gladesville. On the original signing authority with ANZ Bank the intention I think was clear that cheques be signed by two persons, those two persons comprising one of Naveen and Lynette and one of Pravin and Sylvia. There were problems with this bank account because the bank advised Naveen that it could not be responsible for checking that the signatures were as required. The form of authority was then changed so that any two could sign. That authority was given by Lynette. While Pravin said that he was not aware of this and at one stage placed great emphasis on the fact that this was another alteration to banking authorities done without his consent, I do not accept that evidence and I find that he was aware of this. In the long run this was not really denied.

19 It is clear that by April 2000 there were difficulties in the relationship and Pravin was requiring a meeting. An initial meeting took place on 19 April, but as there were no financial statements available it was postponed until 2 May at Gladesville. By this time relations were more difficult but nevertheless some documents were prepared and available and three days later, Pravin obtained additional financial statements and balance sheets. His evidence was that he had not been given any of these for any prior months. This was contested by Naveen, who said that monthly financial statements were produced from the MYOB system by Lynette and that he handed a copy of these to Pravin. On balance I consider that evidence should be accepted, at least from the time that Pravin knew that withdrawals were being made from the account for wages or salary. There would be no reason why the documents would not have been made available as they were very easily obtained. During July and August 2000, Naveen was pursuing a proposal for the sale of “Cosmopolitan” brand watches and both Pravin and Naveen attended a watch and clock fair in Hong Kong in September 2000 with the intention of making some firm arrangement for an agency to import and sell “Cosmopolitan” brand watches. As Naveen had put no money into the company, it was necessary to obtain trade finance or confirming finance for the “Cosmopolitan” watch imports. This was arranged with a trade finance company, Singer and Friedlander Pty Limited. In spite of what seems to have been considerable efforts by Pravin the proposal for importing the range of “Cosmopolitan” watches was never brought to fruition. Nevertheless funds were drawn against the finance facility for the purpose of importing “Tempus” brand watches. Pravin’s case is that the facility was obtained solely for the purpose of importing “Cosmopolitan” brand watches and that he never agreed to or knew of the drawing down on the facility for the purpose of purchasing stock of other brands. I am not certain how this could be maintained because some of the evidence is that Pravin unpacked some of the “Tempus” watches. In any event the evidence does not establish that the facility was to be used only for the importing of “Cosmopolitan” brand watches. In December 2000, Pravin asked Naveen for a meeting to discuss the business, but Naveen said that he had no time and it should be deferred until January. A meeting was eventually held at the Gladesville office on 6 January. There was an argument and Naveen threatened to wind up Lauren No 1. On several occasions during January Pravin went to the Gladesville premises at least twice in the company of his brother Robert with whose help he was able to access some of the computer business records. His original evidence on this was misleading. He ultimately said that by the end of January the password which had given him access to those records had been changed and that access was obtained by using a password with the name of Naveen’s dog. This evidence I do not accept. The dog had died about ten years previously and Pravin was well aware of the password, namely Toby, and obtained the information using that password.

20 Since February 2001, there has been a stalemate in the affairs of Lauren No. 1. According to Naveen, Pravin has not been willing to take any part in the company’s operations or to sign cheques required for payments needed to be made. Pravin denies this saying that he was always willing to make proper payments if shown proper documents. Nevertheless the company is really at a stalemate and it was perfectly clear from the attitude of the parties before me that unless it were an appropriate case to make a compulsory buy out order, the company would have to be wound up, either on the just and equitable ground or on the basis of a claim for oppression. Since February it is accepted that stock of Lauren No 1 has been sold by Lauren No 2 and that Lauren No 2 is in essence operating the watch importing business. However, the evidence as it stands at the present time is that there is a special account of the moneys held by Lauren No. 2 for Lauren No. 1 which now indicates a deficiency in funds. The final position cannot of course be ascertained at this stage.

Pleadings

21 The plaintiff’s claim is made by further amended statement of claim filed on 18 October 2001. This is an extremely difficult document to understand and the claims put forward by the plaintiffs are anything but clear. Nevertheless there are pleaded the following claims:

A. A claim for breach of the joint venture agreement and breach of fiduciary duty, apparently on the same facts through:

(i) Failure to contribute the sum of $600,000.

(ii). Wrongfully and without the consent of the plaintiffs applying moneys loaned for the purpose of the joint venture.

(iii) Failure to provide proper accounts.

(iv) Failure to hold regular meetings.

(v) Wrongfully changing signature cards.

(vi) Wrongfully directing moneys which should have gone to Lauren No 1 to Lauren No 2.

(vii) Wrongfully and without knowledge or consent drawing down the funds on the Singer and Friedlander facility.

(viii) Wrongfully excluding the plaintiffs from access to the books and records of the company and changing locks on the premises and wrongfully diverting income to Lauren No 2.

22 Some of these matters I have dealt with as not being terms of the joint venture contract, but insofar as there is a claim for breach of contract there is no claim for damages for breach but only a claim for equitable compensation, for breach of fiduciary duty. In the findings I have made as to the parties to the agreement breach of fiduciary duty could only be in respect of the duty the brothers owed to each other and I will have to come back to that.

23 There is next pleaded in the statement of claim a claim in fraud, namely that the defendants have fraudulently converted joint venture moneys to their own use. Leaving aside the fact that in strict terms that would have to be a claim made by Lauren No 1 it may in some way relate to oppression. There are particulars given of this claim of fraud which are not necessarily all relevant to such a pleading, namely:

A. A representation as to contribution of $600,000 thereby inducing the plaintiffs to pay moneys by way of contribution with the intent to convert those moneys to their own use. This is an extraordinary claim which was not made out and which really could not be pleaded in the way it has been pleaded.

B. By causing the company’s name to be changed from Timekeepers Australia Pty Ltd to Lauren No 1 and by directing moneys to be paid to Lauren International which were subsequently deposited into the account of Lauren No 2. There is no evidence of that conduct except after February 2001. It could not be said to be fraudulent.

C. Changing of the signature cards. I have already dealt with this.

D. Drawing the cheques on the account of Lauren No 1 by forging signatures of the plaintiff. After the finding as to a wage it has not been shown that any payments were not made for proper company purposes. This is not a finding they were not so far as any claim by a liquidator is concerned.

There are other claims under the fraud heading for which no evidence was brought forward and which probably ought not to have been made. Claims as to drawing down on the Singer and Friedlander facility were not made out and could hardly be said to be fraud. It was not made clear what relief was sought in respect of these allegations, but there is no claim for damages. The particulars of fraudulent activities were put forward in some sort of rolled up way to support a claim for breach of fiduciary duty for which equitable compensation would be payable. None of those matters particularised were shown to have given rise to any loss, giving a right to equitable compensation either in the company or in Pravin and Sylvia, other than the failure to contribute any funds. Insofar as the claim was a breach by failing to contribute $600,000 it must be understood that the Pravin and Sylvia did not contribute their agreed sum of $400,000 and as I understood it the claim seemed to be limited to whatever loss might flow from Naveen not having contributed an amount equal to the amount contributed by Pravin and Sylvia. I accept that the conduct complained of may have been referrable to the oppression claim, although it has to be borne in mind that claim was not pleaded until the further amended statement of claim was filed on 18 October 2001, and most of the particulars of fraud had already been set out.

24 These pleadings of breach of contract, breach of fiduciary duty and an expanded type of fraud were then followed by a pleading that by reason of those matters and by reason of a commitment of funds by the Pravin and Sylvia to the joint venture they lost the opportunity to pursue other investment avenues and possibilities for those funds and Pravin spent time in the business in attempting to recover his funds and therefore was unable to pursue opportunities available to him as a financial planner with the AMP Society. There is no evidence of any of this. The same facts are separately said in paragraphs 24 and 25 to amount to breaches of fiduciary duty, presumably giving rise to a claim for equitable compensation.

25 Next there is a claim for oppression under the Corporations Act. The oppressive conduct being failure to contribute capital as agreed, changing the name without consent, failing to maintain proper records and in essence all the other matters complained about under the fraud heading, together with exclusion of the plaintiffs from the company. There is no proper attempt to separate the various claims. Claims of oppression must relate to oppression of Pravin as a member of the company in the conduct of the affairs of the company. Failure to contribute agreed capital would not, I consider, amount to oppression. The claims are not made out.

26 Various claims are put forward and once again there is some difficulty in separating them out. Nevertheless, the plaintiffs claim:

1. A declaration as to there being a binding and effective joint venture agreement upon the terms pleaded by them, I have already determined that there was an agreement and I have determined the terms.

2. A declaration that the plaintiffs are entitled to an equitable charge over the defendants’ property at 38 Perry Street, Putney and the property of Lauren No 2, being a unit at Dulwich Hill, securing repayment to them of all moneys advanced to Lauren No 1, pursuant to the joint venture agreement. I have determined this against the plaintiffs.

3. An order that Naveen and Lynette pay to Pravin and Sylvia the sum of $161,132 by way of equitable compensation, together with interest. There then follow claims for other sums which have either been repaid or not made out, but the sum of $20,000 should be added to the amounts for which compensation is claimed.

4. A claim for equitable compensation in respect of the matters pleaded, particularly those matters pleaded in paragraph 23, which relate to loss suffered by the first and second plaintiffs as a result of their providing the funds for investment, thereby excluding other investment opportunities of which there is no evidence.

5. An order for an account which I do not understand and reference to the Master for taking of accounts and an order that the first and second defendants indemnify Pravin against liability under the Singer and Friedlander trade finance facility and his guarantee to support that facility.

6. Finally, an order for compulsory purchase by Naveen and Lynette of the shares of the first and second plaintiffs (in spite of the first plaintiff being the only shareholder) for the sum of $187,800 plus interest or such other price as the court determines.

It is apparent from my findings that the only claim which I consider has been made out by the plaintiffs is their claim that Naveen was in breach of the agreement by failing to contribute to the capital of Lauren No 1 as agreed. It does not really seem to be contended that Naveen should have immediately contributed the sum of $600,000 and the plaintiffs’ claim appears to be restricted to the loss sustained by them for the failure of Naveen and, as they would say, his wife, to contribute an amount equal to their contributions. The difficulty with this is that in ordinary circumstances such a claim for breach would give rise to a claim for damages in contract. I do no know why no claim was made for damages for breach of contract. What is apparent however is that the wide ranging claim based on breach of fiduciary duty appears to disregard completely some of the reasoning in Breen v Williams (1995-6) 186 CLR 71 and in particular the following passage from the judgment of Gummow J at p137:

Fiduciary obligations arise (albeit perhaps not exclusively) in various situations where it may be seen that one person is under an obligation to act in the interests of another. Equitable remedies are available where the fiduciary places interest in conflict with duty or derives an unauthorised profit from abuse of duty. It would be to stand established principle on its head to reason that because equity considers the defendant to be a fiduciary, therefore the defendant has a legal obligation to act in the interest of the plaintiff so that failure to fulfil that position obligation represents a breach of fiduciary duty.

A claim for equitable compensation can only arise in respect of a claim for breach of fiduciary duty by a person to whom such a duty was owed. It was not owed to Sylvia. It was not suggested that Naveen and Pravin were in partnership thereby giving rise to a fiduciary relationship. But they were joint venturers in a joint enterprise, conducted through a corporate entity under which they were to make agreed contributions of capital by loan funds to a company to be managed for the benefit of both. Both brothers were entitled to rely on each other to conduct themselves as they had agreed and had a duty to so conduct themselves. Naveen preferred his own interest in taking advantage of his brother’s contributions without playing his own part. Thus he was in a position of conflict and in breach of duty when preferring his own interest. I should add that I do not consider equitable compensation for breach of fiduciary duty would produce a figure different from damages for breach of contract. I consider that the first plaintiff is entitled to compensation for the loss he sustained by reason of Naveen preferring his interest in conflict to his duty through failing to contribute an amount equal to the contributions of Pravin (and his wife) to the venture or in taking advantage of their contributions. The loss should be calculated without regard to the fact that Sylvia was a joint lender with her husband to the company.

27 The defendants’ claim by way of cross-claim is for removal of the caveats and for the winding up of Lauren No 1. Unless there is an order for compulsory buy out on the basis of oppression - and I have found the facts claimed to found oppression not made out - then it is I think accepted that the company must be wound up. It will be a matter for a liquidator to determine whether or not there are moneys owing by Naveen to the company and by Lauren No 2 to the company and if so, what amount. The other claim is for removal of caveats and it is accepted in the light of the decision to which I have come that orders should be made. There will be a claim for damages as a result of the undertaking of the plaintiff as to damages as the price of maintaining their caveats on the titles. That claim will be referred to the Master as it is, I think, accepted there is some damage.

Result

28 The breach of fiduciary duty found is Naveen obtaining the benefit of having his brother’s contribution to the company without keeping his side of the bargain. That is a matter which will have to be referred for inquiry and which may not be capable of determination until the results of the winding up are known. The compensation will be the amount which the plaintiffs would have received from the company in repayment of their loan funds had Naveen contributed an equal amount.

29 I will stand the matter over until early next year to enable draft short minutes to be brought in to give effect to these reasons. In the meantime I will order the caveats be withdrawn. The parties should have the opportunity to come to some arrangement which does not involve winding up if they wish.

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Last Modified: 12/17/2001