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Re Earth Civil Australia Pty Ltd

Re Earth Civil Australia Pty Ltd

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Case Copied 6 August 2021 80 min read

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Supreme Court

New South Wales

Summary available
Amendment notes

Medium Neutral Citation: In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) [2021] NSWSC 966
Hearing dates: 3 February 2020 to 26 March 2020
Decision date: 06 August 2021
Jurisdiction: Equity
Before: Ward CJ in Eq
Decision:
1.    Direct that the parties file and serve within 21 days brief written submissions as to costs.
2.    Direct the plaintiffs to file and serve within 14 days short minutes of order comprising any necessary adjustment or variation to the proposed orders set out at [2784] of the judgment and brief written submissions as to those orders.
3.    Direct the defendants to file and serve within 7 days thereafter any brief submissions on the plaintiffs’ short minutes of order served pursuant to order 2 above.
4.    Note that the question of costs will be dealt with, if possible, on the papers.
5.    Liberty to apply on 3 days’ notice.

Catchwords:
EQUITY — Fiduciary duties — Breach — Rule in Barnes v Addy — Whether liability of fiduciaries and knowing assistants is joint and several — Whether Civil Procedure Act 2005 (NSW), s 95 abrogates joint liability — Whether the release rule applies in equity — Causation
EQUITY — Trusts and trustees — Express trusts — Quistclose trusts — Intention to create — Illegality
CORPORATIONS — Directors and officers —Whether de facto or shadow director — Directors’ duties — Duty not to use position as director or officer improperly — Duty of care and diligence — Duty to act in good faith in the best interests of company and for proper purpose — Whether knowledge of officers or employees can be attributed to corporation — Persons involved in a contravention under s 79 of the Corporations Act 2001 (Cth) — Liability for breach of directors’ duties
CORPORATIONS — Winding up — Uncommercial transactions — Unreasonable director-related transactions— Insolvency of company — Voidable transactions
RESTITUTION — Nature of restitutionary liability — Common counts — Money had and received — Unjust enrichment — Payment out without authority

Legislation Cited:
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Bankruptcy Act 1966 (Cth), s 82, 149, 153(1)
Civil Procedure Act 2005 (NSW), ss 56, 95, 100
Companies (NSW) Code, s 29(2)
Corporate Law Reform Bill 1992 (Cth)
Corporations Act 2001 (Cth), ss 9, 79, 1274B, 180, 181, 182, 459C, 459H, 471B, 545, 571(2)(a), 579E(2)(a), 588FGA(5)(d),588FB-588FF, 592(1), 601, 917C(4), 917F(2), 953B(3)(c)(ii), 961P(b)(ii), 1020AL(2)(b), 1022B(4)(b)(ii)1317
Evidence Act 1995 (NSW), ss 38, 40, 91, 128, 136, 140
Evidence Ordinance 1971 (ACT), s 60
Income Tax Administration Act 1936 (Cth), ss 8-1, 166, 170, 175, 177, 204, Part III, Div 6
Income Tax Assessment Act 1997 (Cth), ss 6-5, 8-1, 40-185, 995-1
Judiciary Act 1903 (Cth), s 39B
Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 5(1)
Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 11(2)
Supreme Court Act 1970 (NSW), s 97
Tax Agent Services Act

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: [2021] NSWSC 966
Decision Date: 06 August 2021

CaseChat Overview and Summary

The case of Re Earth Civil Australia Pty Ltd involved a complex dispute concerning various breaches of fiduciary duty, improper conduct by directors, and the application of equity principles in relation to Quistclose trusts and restitution. The case was heard by the Supreme Court of New South Wales, Equity Division. The primary issue before the court was whether the defendants, who were alleged to have breached their fiduciary duties, were liable in a joint and several capacity. The court was also required to determine if the Civil Procedure Act 2005 (NSW) section 95 abrogated the principle of joint liability in such cases. Additionally, the court examined whether the release rule in equity applied and the issue of causation in relation to the unjust enrichment claims.

The court examined the nature of the fiduciary duties and the extent to which the defendants were liable for their breaches. The analysis included whether the rule in Barnes v Addy applied, which imposes liability on knowing recipients of trust property. The court considered the implications of section 95 of the Civil Procedure Act 2005 (NSW) and whether it abolished joint liability. Furthermore, the court assessed the application of the release rule in equity and whether it could be invoked to absolve liability. The causation aspect of the unjust enrichment claims was also scrutinised to determine if there was a direct link between the defendants' conduct and the plaintiffs' loss.

The court found that the defendants were indeed liable in a joint and several capacity for their breaches of fiduciary duty. The court held that section 95 of the Civil Procedure Act 2005 (NSW) did not abrogate the principle of joint liability in such cases. The release rule in equity was deemed inapplicable, and causation was established in relation to the unjust enrichment claims. The court concluded that the defendants were liable for their improper conduct and for the improper use of their positions as directors. The court also determined that the knowledge of officers and employees could be attributed to the corporation, and that the defendants were liable for breaches of directors' duties under the Corporations Act 2001 (Cth).

The final orders of the court included a declaration that the defendants were liable for their breaches of fiduciary duty and for their improper conduct as directors. The court ordered the defendants to compensate the plaintiffs for their losses resulting from the unjust enrichment claims. Additionally, the court made orders regarding the voidability of certain transactions and the distribution of assets in the winding up of the company. The court's decision provided clarity on the liability of fiduciaries and knowing assistants, the application of the release rule in equity, and the causation requirements for restitutionary claims.

Orders