Zollo v Polley

Case [2020] SASCFC 100

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

ZOLLO & ORS v POLLEY & ANOR

[2020] SASCFC 100

Judgment of The Full Court

(The Honourable Justice Kelly, The Honourable Justice Livesey and The Honourable Justice Bleby)

29 October 2020

EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - PARTICULAR CASES - JOINT VENTURER

EQUITY - EQUITABLE REMEDIES - EQUITABLE COMPENSATION - BREACH OF FIDUCIARY OBLIGATIONS

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - POINTS AND OBJECTIONS NOT TAKEN BELOW - WHEN NOT ALLOWED TO BE RAISED ON APPEAL - QUESTIONS NOT RAISED ON PLEADINGS OR IN ARGUMENT

The parties participated in a joint venture for the development of real estate. On 25 October 2016, the respondents commenced proceedings against the appellants, asserting various causes of action arising in the course of that joint venture, including breach of contract, breach of fiduciary duty, resulting and constructive trust, misleading and deceptive conduct and misrepresentation.

The first appellant is a natural person under a disability through paraplegia and dyslexia. The second respondent is the trustee of the first respondent’s self-managed superannuation fund. The first appellant is a natural person who, at the relevant time, was prohibited from being a director of a company that was a licenced building contractor or supervisor. The second appellant is a company owned and controlled by the first appellant. The third appellant is the corporate trustee of the first appellant’s self managed superannuation fund.

The broad nature of the respondents’ claim was set out in the Statement of Claim. They asserted that the respondents reposed trust and confidence in the appellants in circumstances giving rise to fiduciary duties as joint venturers, that the first and second appellants took unconscionable advantage of the respondents in taking an unauthorised profit of $130,000 as an assignment fee in respect of land purchased for the joint venture, and that the first and third appellants also acted unconscionably in maintaining a claim to a legal interest in real estate paid for by the respondents, notwithstanding that the joint venture did not proceed.

The appellants by their Defence agreed to the characterisation of the relationship between the parties as one giving rise to fiduciary duties, and did not otherwise seek to contradict this at trial. The trial judge found that the first appellant breached those fiduciary duties at the moment of their inception, due to the disciplinary orders that had been made prohibiting him from acting as a director of a company that worked as a building contractor. Further breaches of fiduciary duty and misleading and deceptive conduct by the appellants were found to have occurred in relation to the two land purchases the subject of the Statement of Claim. The trial judge ordered relief that reflected these findings.

The appellants advanced four main grounds of appeal. Ground 1.a took issue with the trial judge’s finding that there was a fiduciary relationship between each of the joint venturers. Ground 1.b complained, further or in the alternative, that the joint venture was void and…

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AGLC
Zollo v Polley [2020] SASCFC 100
Case
[2020] SASCFC 100
Decision Date

CaseChat Overview and Summary

This case concerned an appeal from a decision of the District Court of South Australia. The appellants, Mr Zollo and AZ Holdings (SA) Pty Ltd, appealed against findings made by the primary judge regarding the purchase of a property at 72 Muller Road, Greenacres. The dispute centred on the beneficial ownership of this property, which was ultimately settled in the names of Mr Polley’s self-managed superannuation fund and Mr Zollo’s self-managed superannuation fund. The primary judge had made findings that Mr Polley provided all the funds for the purchase and that there was no evidence to support the equitable existence of Mr Zollo's trust settlement, concluding that AZ Holdings was acting on its own account.

The legal issues before the Full Court of the Supreme Court of South Australia included whether the primary judge erred in finding that Mr Zollo had not proven the equitable existence of his trust settlement in relation to the Muller Road property. Relatedly, the court considered whether the primary judge was correct in concluding that AZ Holdings (SA) Pty Ltd was acting on its own account and not on behalf of a properly constituted trust. The appeal also implicitly raised questions about the nature of the parties' interests in the property, particularly in light of a Declaration of Trust signed by Mr Polley.

The Full Court dismissed the appeal, finding that the appellants had not raised any argument of substance in support of their grounds of appeal. The court noted that the primary judge had made specific findings of fact, including that Mr Polley provided all the funds for the purchase and that there was no evidence to establish the equitable existence of Mr Zollo's trust settlement. The court found that AZ Holdings was acting on its own account. The court concluded that the appellants had failed to demonstrate any error in the primary judge's findings or reasoning.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The judge then made the following findings with respect to the purchase of the Muller Road property:[21]37On 10 February 2015, Neil Polley Holdings Pty Ltd, as trustee of the Neil Polley Superannuation Fund, prepared a letter of nomination authorising SADH to purchase the property at 72 Muller Road, Greenacres. 38Mr Zollo was required to settle a superannuation fund trust as a self-managed super fund with a company, AZ Holdings as trustee. In the absence of any evidence consistent with the settlement of that trust, Mr Zollo has not proved the equitable existence of that settlement. The only evidence before the Court is that AZ Holdings was at all material times acting on its own account as the legal and beneficial owner of all relevant interests.39The notice of offer to purchase the Muller Road land in the name of SADH was dated 5 February 2015. A letter of nomination dated 10 February 2015 from the second plaintiff as trustee for the Polley Superannuation Fund authorises and instructs SADH to make the offer upon the Muller Road property and to pay the deposit.40This letter describes the property as being in joint names but that was inaccurate because Neil Polley Holdings Pty Ltd in its capacity as trustee is the named entity; Mr Polley signed the letter both for that trustee and for SADH. There was no authorisation in respect of any Zollo interests.(Emphasis added)[21] Polley & Anor v Zollo & Ors [2019] SADC 76; Findings of Fact [37]-[40]. Mr Polley provided the funds for the purchase of the Muller Road property, the full settlement cost of which was $952,657.39.[22] He paid the deposit on 23 March 2015.[23] Settlement occurred at the end of May 2015. The property was settled in the names of Mr Polley’s SMSF, Neil Polley Holdings Pty Ltd and Mr Zollo’s SMSF, AZ Holdings (SA) Pty Ltd.[22] Polley & Anor v Zollo & Ors [2019] SADC 76; Findings of Fact [49].[23] Polley & Anor v Zollo & Ors [2019] SADC 76; Findings of Fact [72]. A document called a Declaration of Trust, signed by Mr Polley, was in evidence. This document appears to have effected a separation of interests in the Muller Road property. Mr Polley had understood that the land would be purchased by him, as a joint venture project.[24] He gave evidence that he had not understood that a separation of interests would occur, and that ultimately, he discovered that 24 percent of the overall title had been transferred to Mr Zollo’s superannuation fund.[25][24] Polley & Anor v Zollo & Ors [2019] SADC 76 at [84].[25] Polley & Anor v Zollo & Ors [2019] SADC 76 at [81]-[83]. The appellants pleaded that Mr Polley had, on advice, agreed to have 24 percent of the Muller Road property, and specifically Lot 5, which was the block with the house on it, transferred to AZ Holdings (SA) Pty Ltd, ‘as part payment of the development of the three properties which was registered at the Land Titles Office in Adelaide, South Australia on the 23rd June 2015’. They pleaded that, in consequence, AZ Holdings (SA) Pty Ltd owned 24 percent of Muller Road, being Lot 5 and the house on Lot 5.[26][26] Defence at [56].

Decision

Reasons for decision

Ground 4 is without merit.Conclusion The appellants have not raised any argument of substance in support of any ground in the Second Notice of Appeal. I would dismiss the appeal.

Ratio Decidendi

Legal Principle Established

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