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Re Lingamaneni Momentum Melbourne Unit Trust

Re Lingamaneni Momentum Melbourne Unit Trust

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Case Copied 14 February 2025 68 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2023 01672

IN THE MATTER OF LINGAMANENI MOMENTUM MELBOURNE UNIT TRUST (ACN 131 501 123)

BETWEEN:

GNIEL NOMINEES PTY LTD (ACN 074 665 571) AS TRUSTEE FOR THE GNIEL FAMILY TRUST (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)	Plaintiffs
v
SEXTON PTY LTD (ACN 082 289 870) (AND ANOTHER ACCORDING TO THE ATTACHED SCHEDULE)	Defendants

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JUDGE:	Cosgrave J
WHERE HELD:	Melbourne
DATES OF HEARING:	24 and 25 June 2024
DATE OF JUDGMENT:	14 February 2025
CASE MAY BE CITED AS:	Re Lingamaneni Momentum Melbourne Unit Trust
MEDIUM NEUTRAL CITATION:	[2025] VSC 40

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EQUITY – Unit trust – Unit trust created as a vehicle for a commercial joint venture –Fiduciary duties as between unitholders – Interpretation of trust deed – United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1 distinguished – Joint venture not a partnership – No fiduciary duty.

FRAUD ON A POWER -- Construction of a termination clause in a trust deed – Ostensible purpose of termination power – Doctrine does not operate to curtail exercise of termination power – Ostensible purpose is true purpose.

TRUSTS – Trustee Act 1958 - s 63 – Whether investigation and potential litigation a “transaction” under the Act – Whether “expedient” for the Court to make orders under the Act – Not a transaction – Not expedient.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Fary SC with Mr J Schulz	BlueRock Law
For the First Defendant	Mr J Tomlinson	SBA Legal

HIS HONOUR:

Introduction

The plaintiffs are various entities associated with Graham Gniel (“Gniel”) and Tony Boniello (“Boniello”) who together hold approximately 49% of the units in the Lingamaneni Momentum Melbourne Unit Trust (“the Trust”).

Gniel is a director and secretary of the first plaintiff, Gniel Nominees Pty Ltd (”Nominees”). He is a director and secretary of the second plaintiff, Gniel Investments Pty Ltd (“Gniel Investments”). He is a director and secretary of the third plaintiff, Kelniel Developments Pty Ltd (“Kelniel Developments”). He has held these positions since 1996.

Boniello is the sole director and secretary of the fourth plaintiff, Boniello Enterprises Pty Ltd (“Boniello Enterprises”). He has held that position since 2004. He is also a director and secretary of the fifth plaintiff, Boniello Investments Pty Ltd (“Boniello Investments”). He has held that position since 2008.

The first defendant, Sexton Pty Ltd (“Sexton”), is the other unitholder in the Trust and holds 51% of the units in the Trust. Paul Huggins (“Huggins”) is the sole director, secretary and shareholder of Sexton.

The second defendant, Graeme Still, (“the Replacement Trustee”) was appointed trustee by orders of this Court dated 22 July 2022 with effect from 2 September 2022.

The Trust is governed by a written deed (“Trust Deed”). On 20 April 2023, Sexton, through his solicitor,…

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: [2025] VSC 40
Decision Date: 14 February 2025

CaseChat Overview and Summary

In the case of Re Lingamaneni Momentum Melbourne Unit Trust, the matter was heard in the Supreme Court of Victoria. The dispute arose from the termination of a unit trust established as a vehicle for a commercial joint venture. The joint venture partners contested the termination and sought various remedies, including an injunction against the trustee from proceeding with the winding up of the trust. The court was tasked with determining the fiduciary duties owed by the unitholders to one another, the interpretation of the trust deed's termination clause, and whether certain actions by the trustee constituted a "transaction" under the Trustee Act 1958.

The central legal issues involved interpreting the fiduciary duties between the unitholders and whether the joint venture constituted a partnership, which would have imposed fiduciary obligations. The court also needed to construe the termination clause in the trust deed, determining whether the ostensible purpose of the termination power could limit its exercise. Additionally, the court had to consider whether the trustee's investigation into the trust's affairs and potential litigation constituted a "transaction" under the Trustee Act 1958, and if it was expedient for the court to make orders under the Act.

The court held that the unitholders did not owe each other fiduciary duties as the joint venture was not a partnership. The ostensible purpose of the termination clause in the trust deed was found to be its true purpose, and the doctrine of ostensible purpose did not curtail the exercise of the termination power. Furthermore, the court found that the trustee's investigation and potential litigation did not amount to a "transaction" under the Trustee Act 1958, and it was not expedient for the court to make orders under the Act. Consequently, the court dismissed the joint venture partners' application for an injunction and other relief.

The final orders of the court were to dismiss the application made by the joint venture partners. The court determined that the trustee's actions were within the scope of the termination power and did not constitute a transaction under the Trustee Act 1958. The court also found that it was not expedient to make orders under the Act, and therefore, the application for an injunction and other relief was dismissed.

Orders