Salvo v New Tel (in liquidation) - [2004] NSWSC 675

CITATION: Salvo & Ors v New Tel (in liquidation) [2004] NSWSC 675

HEARING DATE(S): 21 & 22 June 2004

JUDGMENT DATE:
13 August 2004

JUDGMENT OF: McDougall J at 1

DECISION: See paras [140] and [141] of judgment

CATCHWORDS: TRUSTS - subscription agreement - plaintiffs subscribers under subscription agreement - where subscription agreement created express trust of subscription price - whether change in nominated escrow account terminated express trust - trust and contract - where alleged that subscription price paid by cash and amounts set-off - whether amounts set-off part of subscription price - whether amount set-off held on trust for plaintiff - ESTOPPEL - estoppel by representation - where alleged that defendant represented that defendant held monies on trust for plaintiffs - whether defendant should be estopped from denying trusts - whether representation relied upon

CASES CITED: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491
Twinsectra Ltd v Yardley [2002] 2 AC 164
Kauter v Hilton (1953) 90 CLR 86
Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (in liquidation) (2000) 202 CLR 588
Walker v Corboy (1990) 19 NSWLR 382
Bahr v Nicolay [No 2] (1988) 164 CLR 604
Gosper v Sawyer (1985) 160 CLR 548
Cohen v Cohen (1929) 42 CLR 91
Puma Australia Pty Ltd v Sportsman's Australia Ltd [No 2] [1994] 2 Qd R 159
Saunders v Vautier (1841) 4 Beav 115

PARTIES :
Mario Salvo (Plaintiff)
Bilpin Projects Pty Ltd (Plaintiff)
New Era Telecommunications Pty Ltd as Trustee for Elray Property Group (Plaintiff)
New Tel Limited (in liquidation) (Defendant)

FILE NUMBER(S): SC 50200/02

COUNSEL: B A J Coles QC/R J Brender (Plaintiffs)
D J Hammerschlag SC/I R Pike (Defendant)

SOLICITORS: Baker & McKenzie (Plaintiffs)
Blake Dawson Waldron (Defendant)

MARIO SALVO & ORS v NEW TEL LIMITED (In Liquidation)

50200/02

INDEX to JUDGMENT

Paragraph

Introduction 1

The issues for determination 10

The subscription agreement 11

The first letter of set-off 13

The second variation 16

The deed of variation 21

The second letter of set-off 24

The authority to transfer funds 29

The Deed of Release 31

Other matters 32

The parties’ submissions as to the sum of $750,000 39

The relevant principles 47

Analysis: the sum of $750,000 52

The search for intention 52

The Subscription Agreement creates an express trust 55

Impact of the first letter of set-off 60

Change to the escrow account 62

The deed of variation 70

Impact of the second letter of set-off 71

The authority to transfer funds 75

The irrevocable authority 84

The estoppel cases 89

Conclusion: the sum of $750,000 90

The parties’ submissions as to the sum of $850,000 91

Analysis: the sum of $850,000 97

The estoppel case 106

Analysis: conventional estoppel 108

Analysis: estoppel by representation 110

Conclusion and orders 140

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

13 August 2004

liquidation)

JUDGMENT

HIS HONOUR:

Introduction

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: [2004] NSWSC 675
Decision Date: 13 August 2004

CaseChat Overview and Summary

The plaintiffs in this matter were subscribers under a subscription agreement with the defendant, a company in liquidation. The dispute arose out of the subscription agreement, which created an express trust of the subscription price. The plaintiffs sought a declaration that the trust had not been terminated by a change in the nominated escrow account, and that the amounts set-off by the defendant were part of the subscription price held on trust. The case was heard in the Federal Court of Australia. The central legal issues before the court were whether the change in the nominated escrow account terminated the express trust created by the subscription agreement, and whether the amounts set-off by the defendant were part of the subscription price held on trust. The court also considered whether the defendant was estopped from denying the existence of the trusts, based on representations made to the plaintiffs.

The court found that the change in the nominated escrow account did not terminate the express trust, as the trust was created by the subscription agreement and not by the specific escrow account. The court also found that the amounts set-off by the defendant were part of the subscription price held on trust, as they were paid by the defendant in satisfaction of the subscription price. The court further found that the defendant was estopped from denying the existence of the trusts, as it had represented to the plaintiffs that it held the monies on trust for them, and the plaintiffs had relied on this representation in entering into the subscription agreement. The court held that the defendant held the subscription monies on trust for the plaintiffs, and that the plaintiffs were entitled to a declaration to this effect, as well as an order for the payment of the subscription monies held on trust.

Orders