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UTi (Aust) Pty Ltd v Sheehan

UTi (Aust) Pty Ltd v Sheehan

Case [2017] NSWSC 344 3 April 2017

Constructive Trust

Breach of Contract

Fraudulent Misrepresentation

Commercial Law

Trusts & Equity

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: UTi (Aust) Pty Ltd v Sheehan & Anor [2017] NSWSC 344
Hearing dates: 14, 15 November and 6 December 2016
Date of orders: 03 April 2017
Decision date: 03 April 2017
Jurisdiction: Equity
Before: Slattery J
Decision:
First defendant found to have fraudulently procured the plaintiff to give him cheques which he paid to his company, the second defendant. Declarations made that the funds so paid are held on constructive trust for the plaintiff. Alternative claims made out. Declarations made that the first defendant is liable to the plaintiff in the sum of $2,911,411.76.

Catchwords: CONSTRUCTIVE TRUST – logistics joint venture – first defendant/joint-venturer presents fraudulent invoices to the plaintiff, its fellow joint venturer – payments on the invoices directed to and received by the second defendant, a company the first defendant controls – first defendant declared bankrupt - second defendant in liquidation - plaintiff seeks declaration that the funds paid by the first defendant’s actions to the second defendant are now held on constructive trust for the plaintiff – claims in the alternative for fraudulent misrepresentation, breach of the Australian Consumer Law and breach of contract.
Legislation Cited: Corporations Act 2001 (Cth)
Civil Procedure Act 2005, s 100
Cases Cited: Black v S Freedman & Co (1910) 12 CLR 105
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Briginshaw v Briginshaw (1938) 60 CLR 336
Commonwealth Bank of Australia v Barker (2014) 253 CLR 169
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Derry v Peek (1889) 14 App Cas 337
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296
Heperu Pty Limited v Belle (2009) 76 NSWLR 230
Houghton v Arms (2006) 225 CLR 553
Hungerfords v Walker (1989) 171 CLR 125
Magill v Magill (2006) 226 CLR 551
MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657
Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400
Robb Evans v European Bank Ltd (2004) 61 NSWLR
75
Sze Tu v Lowe [2014] NSWCA 462
Wallersteiner v Moir (No 2) [1975] QB 373
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640
Category: Principal judgment
Parties: Plaintiff: UTi (Aust) Pty Ltd
First Defendant: Brian Sheehan
Second Defendant: Scarlet Amber Pty Ltd ACN 006 920 172
Representation:
Counsel

Plaintiff: C. Withers

Solicitor

Plaintiffs: Maurice Lynch, Mills Oakley
Defendants: Self-represented

File Number(s): 2016/67061
Publication restriction: No

Judgment

UTi (Aust) Pty Ltd (“UTi”) manages supply chain logistics. From 1995 UTi made a series of profit sharing agreements with Mr Brian Sheehan, a customs broker and freight-forwarding consultant. On 21 March 2016, Uti terminated all its existing agreements with Mr Sheehan, who was declared bankrupt on 17 June 2016.
The plaintiff, UTi alleges that Mr Sheehan, the first defendant, defrauded it between October 2015 and February 2016. UTi claims that Mr Sheehan developed a fraudulent scheme whereby: (1) he presented false invoices to…

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.

Continue reading UTi (Aust) Pty Ltd v Sheehan

Details

AGLC: UTi (Aust) Pty Ltd v Sheehan [2017] NSWSC 344
Case: [2017] NSWSC 344
Decision Date: 03 April 2017

CaseChat Overview and Summary

The case of UTi (Aust) Pty Ltd v Sheehan involved a dispute between UTi, a logistics joint venturer, and two defendants. The first defendant, who was also a joint venturer, fraudulently presented invoices to UTi, the plaintiff. The payments on these invoices were directed to and received by the second defendant, a company controlled by the first defendant. Following the first defendant's bankruptcy and the second defendant's liquidation, UTi sought a declaration that the funds paid by the first defendant's actions to the second defendant were held on constructive trust for UTi. UTi also claimed in the alternative for fraudulent misrepresentation, breach of the Australian Consumer Law, and breach of contract.

The primary legal issue was whether the funds in the second defendant’s account, which were the result of the fraudulent invoices, were held on constructive trust for UTi. The court had to determine the nature and scope of the constructive trust, as well as whether UTi's alternative claims were valid. The court examined the nature of the joint venture, the fraudulent conduct, and the relationship between the defendants and the companies they controlled.

The court found that the first defendant's fraudulent actions and the resulting payments constituted a breach of fiduciary duty, giving rise to a constructive trust over the funds in the second defendant's account. The court held that the first defendant held the funds on constructive trust for UTi due to the fraudulent misrepresentations. The court also dismissed UTi's alternative claims, finding that there was no basis for fraudulent misrepresentation, breach of the Australian Consumer Law, or breach of contract.

The court ordered that the funds held by the second defendant were to be held on constructive trust for UTi and directed that those funds be distributed accordingly. The alternative claims were dismissed, and no orders were made in relation to those claims.

Orders