John Sheahan v Martin Thompson (No 2) [2015] NSWSC 871
Hearing dates:
4, 5, 6, 7 and 8 May 2015
Date of orders:
02 July 2015
Decision date:
02 July 2015
Jurisdiction:
Equity Division - Commercial List
Before:
Rein J
Decision:
See [186]
Catchwords:
EQUITY - trusts - where payment to a unitholder a pre-condition to payment to other potential objects upon vesting - breach of trust - where payment made by trustees to a third party out of trust assets to settle separate proceedings against the trustees personally for misapplication of trust assets - whether the unitholder consented to the payment out of trust assets - whether consent fully informed- knowing receipt - first limb of Barnes v Addy - whether the defendant who received trust property had knowledge of the breach of trust - whether the first defendant's knowledge is to be treated as the knowledge of the corporate defendants which received trust property - whether rescission necessary in a claim in personam for knowing receipt of trust property- release - whether a trustee who has agreed to pay out trust money to a third party in breach of trust for its own benefit can give an effective release to the third party recipient - whether successor trustees bound by deed of release granted by original trustees to a third party - where releases contained in two separate deeds - whether rescission of both deeds a precondition to relief - whether defences of laches, acquiescence and delay can be established
[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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Sheahan v Thompson (No 2) [2015] NSWSC 871
Case
[2015] NSWSC 871
Decision Date
CaseChat Overview and Summary
The case of Sheahan v Thompson (No 2) involved the trustees of a unit trust who were sued by the unitholders for breach of trust. The trustees had paid trust assets to a third party to settle separate proceedings against them for misapplication of those assets. The unitholders claimed that the trustees' actions amounted to a breach of trust and that the third party had received the trust property knowingly. The Court of Appeal of the Supreme Court of New South Wales was tasked with deciding several legal issues, including whether the unitholder had consented to the payment and if that consent was fully informed, and whether the third party had knowledge of the breach of trust. The court also considered whether the third party's knowledge should be attributed to the corporate defendants who received the trust property, and if rescission was necessary in a claim in personam for knowing receipt of trust property. Additionally, the court examined whether a trustee who had agreed to pay out trust money to a third party in breach of trust for their own benefit could give an effective release to the third party recipient, and whether successor trustees were bound by a deed of release granted by original trustees to a third party. Finally, the court assessed whether rescission of the deeds of release was a precondition to relief and if the defences of laches, acquiescence and delay could be established.
The court found that the unitholder had not consented to the payment of trust assets to the third party, and that any consent that was given was not fully informed. The court also determined that the third party had knowledge of the breach of trust, and that this knowledge should be attributed to the corporate defendants who received the trust property. The court held that rescission was not necessary in a claim in personam for knowing receipt of trust property, and that a trustee who had agreed to pay out trust money to a third party in breach of trust for their own benefit could not give an effective release to the third party recipient. The court further held that successor trustees were not bound by a deed of release granted by original trustees to a third party, and that rescission of the deeds of release was a precondition to relief. Finally, the court found that the defences of laches, acquiescence and delay could not be established.