Trilogy Funds Management Ltd v Sullivan (No 2)

Trilogy Funds Management Limited sought compensation from Sullivan, Swan, Donaldson, and McCormick for breaches of duty by the respondents who were directors or officers of City Pacific, the responsible entity of Trilogy's managed investment scheme. Trilogy claimed that the respondents were responsible for approving or purporting to approve increases to a loan facility in contravention of the scheme’s constitution and compliance plan. They further claimed that the respondents failed to exercise care and diligence in preventing advances being made above the approved limit of the loan facility. Trilogy alleged that the loss to the Fund was $37,069,053.92, being the total amount advanced to AGA beyond the approved facility limit. The court was required to determine whether the respondents contravened their statutory duties under the Corporations Act, whether the Fund suffered damage resulting from those contraventions, and if so, whether any of the respondents should be excused or relieved of liability under s 1317S or s 1318 of the Corporations Act.

The court found that the respondents contravened their duties by approving or purporting to approve increases to the loan facility and by failing to prevent advances being made above the approved limit and in circumstances where there was inadequate security. The court held that the Fund suffered damage that resulted from those contraventions. The court further found that none of the respondents should be excused or relieved of liability under s 1317S or s 1318 of the Corporations Act. The court ordered that compensation orders be made against each of the respondents, with Sullivan and McCormick ordered to pay $37,214,088.28, and Swan and Donaldson ordered to pay $6,245,974.93, together with interest pursuant to s 51A of the Federal Court Act from 1 July 2007 to the date that judgment is entered. The court allowed the parties to confer with a view to agreeing on the appropriate orders to give effect to the judgment. If the parties could not reach an agreement, the court ordered that written submissions be filed and served on or before 10 February 2016.