Segal v Sharma

The appeal in *Segal v Sharma* concerned a dispute arising from an agreement relating to a radiology practice conducted through a corporate trustee of a unit trust, where the units were held by doctors' discretionary trusts. The central question was whether the doctors, as beneficiaries of these trusts, were personally liable to cover any shortfall if the business incurred a loss.

The court was required to determine the proper construction of the agreement, specifically whether the obligation to pay a shortfall extended to the individual doctors. A further issue was whether any such loss had to be demonstrably established by audited financial accounts before the liability to pay the shortfall could arise.

The Court of Appeal held that the agreement did not impose personal liability on the doctors for business losses. It found that the "commercial arrangements" referred to in the agreement did not extend to making the individual beneficiaries of discretionary trusts personally liable for the debts of the business conducted by the corporate trustee. The court also determined that the agreement did not mandate that losses be based on audited financial accounts as a prerequisite for the shortfall obligation.

The appeal was dismissed, and the appellants were ordered to pay the first respondent's costs of the appeal.