Scrivener v Cappello

Case [2021] NSWCA 330

Court of Appeal


Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Scrivener v Cappello [2021] NSWCA 330
Hearing dates: 28 October 2021
Decision date: 21 December 2021
Before: Bathurst CJ at [1];
Bell P at [78];
Macfarlan JA at [79]
Decision:

(1)   Appeal dismissed.

(2)   Cross-appeal allowed.

(3)   Set aside Order 1 of the orders made by the primary judge and in lieu make the following declaration:

The Court declares that there was a partnership between the first plaintiff and the first defendant that acquired the rights to control and sell the three contiguous properties situated at 88 Rouse Road, 104 Rouse Road and 96 Cudgegong Road, Rouse Hill and that the second defendant held the said rights in trust for the said partnership.

(4)   Vary Order 2 of the orders made by the primary judge to provide as follows:

(a)   The first and second defendants are liable to pay to the first plaintiff equitable compensation in an amount of $6,203,689.48 inclusive of interest.

(b)   The second defendant is liable to pay the second plaintiff equitable compensation in an amount of $6,203,689.48 inclusive of interest.

(c)   Any payment made by the first or second defendants pursuant to Order 4(a) shall result in a pro tanto reduction of the second defendant’s liability under Order 4(b).

(d)   Any payment made by the second defendant under Order 4(b) shall result in a pro tanto reduction of the liability of the first and second defendants under Order 4(a).

(5)   Order the appellant pay 80 per cent of the respondents’ costs of the appeal and cross-appeal.

Catchwords:

PARTNERSHIPS AND JOINT VENTURES – rights and duties between partners – fiduciary relationship – obligations – whether the appellant was an accessory to breaches of fiduciary obligations owed to the respondents – where the appellant caused the third respondent to fail to account to the second respondent for one half of the profits derived from the acquisition and subsequent sale of three contiguous parcels of land – where primary judge did not refer to two essential matters to establish accessorial liability under the second limb of Barnes v Addy – where the appellant knew of facts and circumstances which would indicate the fact of the breach on the part of a fiduciary to an honest and reasonable person

PARTNERSHIPS AND JOINT VENTURES – rights and duties between partners – fiduciary relationship – obligations – whether the appellant was liable to the first respondent or the second respondent

PARTNERSHIPS AND JOINT VENTURES – rights and duties between partners – interpretation of agreement – oral agreement – where there was an agreement to enter into a partnership to acquire and resell three contiguous parcels of land and share expenses and profits equally – whether the agreement was subject to a sunset condition – where the first respondent’s evidence of oral agreement accepted – where the third respondent was a vehicle entrusted to hold assets on behalf of the partnership

Legislation Cited:

Supreme Court Act 1970 (NSW)

Cases Cited:

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AGLC
Scrivener v Cappello [2021] NSWCA 330
Case
[2021] NSWCA 330
Decision Date

CaseChat Overview and Summary

In *Scrivener v Cappello*, the New South Wales Court of Appeal considered an appeal and cross-appeal concerning alleged breaches of fiduciary obligations arising from a partnership agreement. The dispute involved the acquisition and subsequent sale of three contiguous parcels of land, with the respondents alleging that the appellant was an accessory to breaches of fiduciary duties owed to them by a third party. The core of the disagreement centred on the appellant's role in causing a company, the third respondent, to fail to account for profits derived from the land transactions.

The legal issues before the Court of Appeal included whether the appellant was liable as an accessory to breaches of fiduciary obligations. This required determining whether the appellant had knowledge of facts and circumstances that would have indicated to an honest and reasonable person that a breach of fiduciary duty was occurring. Additionally, the court had to consider the interpretation of an oral agreement for a partnership to acquire and resell the land, including whether it was subject to a sunset condition, and whether the third respondent held the rights to the properties in trust for the partnership.

The Court of Appeal, comprising Bathurst CJ, Bell P, and Macfarlan JA, found that the primary judge had not adequately addressed certain essential matters for establishing accessorial liability under the second limb of *Barnes v Addy*. However, the Court of Appeal ultimately dismissed the appeal. It allowed the cross-appeal, declaring that a partnership existed between the first plaintiff and the first defendant for the acquisition and sale of the properties, and that the second defendant held the rights in trust for this partnership. The court also varied the primary judge's orders regarding equitable compensation, finding the first and second defendants liable to pay substantial sums to the first and second plaintiffs respectively, with provisions for pro tanto reduction of liability.

Orders

Orders of the court

(1) Appeal dismissed.

(2) Cross-appeal allowed.

(3) Set aside Order 1 of the orders made by the primary judge and in lieu make the following declaration:

The Court declares that there was a partnership between the first plaintiff and the first defendant that acquired the rights to control and sell the three contiguous properties situated at 88 Rouse Road, 104 Rouse Road and 96 Cudgegong Road, Rouse Hill and that the second defendant held the said rights in trust for the said partnership.

(4) Vary Order 2 of the orders made by the primary judge to provide as follows:

(a) The first and second defendants are liable to pay to the first plaintiff equitable compensation in an amount of $6,203,689.48 inclusive of interest.

(b) The second defendant is liable to pay the second plaintiff equitable compensation in an amount of $6,203,689.48 inclusive of interest.

(c) Any payment made by the first or second defendants pursuant to Order 4(a) shall result in a pro tanto reduction of the second defendant’s liability under Order 4(b).

(d) Any payment made by the second defendant under Order 4(b) shall result in a pro tanto reduction of the liability of the first and second defendants under Order 4(a).

(5) Order the appellant pay 80 per cent of the respondents’ costs of the appeal and cross-appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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