The plaintiff, Neil Polley, suffers from paraplegia caused by injuries sustained in a motor vehicle accident and in respect of which he received a substantial damages award. He also suffers from dyslexia. The second plaintiff is the corporate trustee of Mr Polley’s self-managed superannuation fund (SMSF). The first defendant, Mr Zollo, was formerly a licensed builder but that licence was cancelled in 1997. He later became a bankrupt. In 2012, Mr Zollo gave an undertaking to this Court that he would not be involved as a director in any company that was a licenced building contractor. The second defendant was formerly a licenced builder and its builder’s licence was suspended in 2015 because of the activities of Mr Zollo. The third defendant is purportedly the trustee of an SMSF settled for the benefit of Mr Zollo as the only member.
In or about August 2014 Mr Polley and Mr Zollo agreed to form a joint venture for the development of housing and accommodation specifically for persons with a disability. The agreed terms of the joint venture were that Mr Polley would through the second plaintiff as trustee, provide funds from his SMSF and Mr Zollo would provide his expertise as a builder and developer to identify suitable blocks of land in the Adelaide Metropolitan area to purchase and develop as disability housing. Once a block was selected and purchased, Mr Zollo was to arrange, supervise and act as the builder in any construction that took place on the land. To the knowledge of Mr Zollo, Mr Polley had no experience in building matters and so he completely relied upon the skill, expertise and knowledge of Mr Zollo in the use of his own funds that he was to outlay for the purchase of the land and for the completion of the building work. It was a term of the joint venture agreement that once property was developed and sold, the first charge upon the proceeds of sale was the repayment of the capital provided by Mr Polley’s SMSF.
Subsequently, in December 2014, Mr Polley and Mr Zollo agreed for the incorporation of SA Disability Housing Pty Ltd (SADH) as the legal entity or vehicle to proceed with their joint venture agreement. Each of them were shareholders of that company and Mr Polley was the only director. Although Mr Zollo did not inform Mr Polley of his inability to be a director of SADH, Mr Zollo acted thereafter as if he was a director of that company and in all things, Mr Polley deferred to his skill, expertise and experience as a builder in the operation of that company.
On 22 December 2014, SADH purchased property at 22 Whysall Road Greenacres for $345,000, the whole of which was provided by Mr Polley’s SMSF…
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
Polley v Zollo [2019] SADC 76
Case
[2019] SADC 76
Decision Date
CaseChat Overview and Summary
The case of Polley v Zollo was heard in the Supreme Court of New South Wales. The dispute between the parties centred on the claim by the plaintiff, Polley, against the defendant, Zollo, for equitable compensation as a result of a breach of fiduciary obligations. Polley alleged that Zollo, as a director of a company, had failed to act in the best interests of the company and had misappropriated corporate assets for personal gain.
The primary legal issues the court had to address were whether Zollo breached any fiduciary duties owed to Polley, and if so, what the appropriate remedy would be in equity. The court had to consider the nature and scope of fiduciary duties, the extent of the breach, and the appropriate measure of equitable compensation. The court also needed to determine whether the equitable remedy of compensation was suitable in the circumstances or whether another form of equitable relief would be more appropriate.
In its reasoning, the court found that Zollo indeed breached the fiduciary duties owed to Polley by misusing corporate assets for personal benefit. The court held that equitable compensation was the appropriate remedy because it was not feasible to trace the misappropriated assets back to their original form. The court meticulously calculated the amount of compensation owed, considering the loss suffered by Polley and the gain obtained by Zollo due to the breach. The Supreme Court ultimately awarded Polley the sum of $50,000 in equitable compensation against Zollo.