Collie v Merlaw Nominees Pty Ltd & oRS [1998] VSC 203

Collie v Merlaw Nominees Pty Ltd & oRS [1998] VSC 203 - VSC 1998 case summary — Zoe

[43]

I am satisfied that Mr Nolan and Mr Collie had, by early February 1985, agreed upon the transaction which they, or persons or entities under their control, would enter into. The terms of this transaction were those set out in the hand-written draft contract of sale prepared by Mr Collie and assented to by Mr Nolan in the week before Christmas 1984. All that remained was to prepare the documentation and to procure the funds necessary to give effect to it. Mr Nolan said that all the terms of the agreement had not been settled. He was unwilling to sell certain antique light fittings in the premises notwithstanding that they were included in the draft agreement and he had mentioned this with Mr Collie. I reject this evidence. He said that other aspects of the transaction, such as the sharing of outgoings and the purchase of equipment to be used by the two men or their businesses and the means of funding this had not been agreed. I find that the two men said nothing, at least prior to 21 February 1985, about these matters. They were content to continue as before, sharing these outgoings equally. They had minimal common equipment, perhaps a telex. Other items came later. They were agreed, too, that Mr Nolan would attend to any accounting matters affecting the trustee and the trusts and that Mr Collie would do the legal work. In my view the proper analysis of the arrangement agreed to between the two men is that there would be two or perhaps three agreements. The first, between Merlaw and the trustee Terramont was for the purchase of the land. The second related to the contributions which each man or his entities would make to Terramont to enable it to meet its obligations under the contract of sale. The parties to this second agreement were the two men, although it was probably assumed that the funds would be provided by one or more of the corporate entities within the group of companies which each controlled. These contributions would include, too, the outgoings which Terramont as purchaser in possession would incur. It may be that they agreed in February, or perhaps later, that Terramont would also be an appropriate vehicle for the acquisition of equipment for them to share and to pay the costs associated with this. The distinction between these two agreements is confirmed by the fact that the contract of sale makes no mention of the second agreement and, further, by the fact that its capacity as trustee of the two trusts is mentioned only with respect to the first agreement.

[48]

He spoke of the occasion when the wives signed the trust documents but maintained that he never signed the contract. He said that Ms Barr handed to him the contracts bearing Mrs Collie's signature sometime in February. This must have been on a date after she had signed because he did not recall her being present when the documents were handed to him. He said that the documents were given to him for review but for some reason he did not review them. The documents were left on his desk, he said, for four years until 1989 when he sent them to his solicitors, Baker & McKenzie. He said that about 12 months after February 1985 Ms Barr enquired whether he had signed them and he told her that he had not. I find this account exceedingly improbable and I reject it. It is the more improbable given the events that followed. For three and a half years after February 1985 he conducted himself in his dealings with Mr Collie in every respect as if a contract had been made. He now says that, if a contract of sale of land was agreed to, it was not executed and, in any event, it was not binding because it represents part only of a broader agreement between the two men. Merlaw's assertion in this proceeding, made on his instructions, that no concluded agreement was reached regarding the sale of land to Terramont sits very uneasily with Merlaw's acceptance and retention of $90,000 from Terramont, including $45,000 from Mr Collies' entities. It is inconsistent with what Mr Nolan told the Australian Tax Office and, on many occasions, the Bank, at least until he obtained legal advice on or shortly before 6 October 1989. I have already mentioned that Mr Nolan in the early part of 1989 negotiated with Mr Collie on the basis that the property was owned by Terramont with a view to buying out Mr Collie's or Terracol's interest. Both before and after these negotiations broke down Mr Nolan made regular demands upon Mr Collie for his contribution to the sums payable by Terramont to the Bank to meet Merlaw's obligations as agreed by the contract of sale. These demands are inconsistent with the position he would now adopt that no contract existed. I am satisfied that until 6 October Mr Nolan and, therefore, Merlaw believed that Merlaw had entered into a contract to sell the Jolimont property to Terramont and that, as a result, Mr Nolan's interest owned only one half of the land. Thereafter Mr Nolan began to deny the agreement and maintained this position until he gave evidence before me. I am reluctant generally to accept his testimony unless it be corroborated by independent reliable evidence.

[94]

Counsel for the plaintiff sought to overcome this difficulty in a number of ways. First, they relied on those cases where the corporation was in truth a partnership between the directors so that a wrong committed by one director to such company may be enforced by another director: Glavanics v Brunninghausen (1996) 19 ASCR 204. This is not such a case. Next, it was said that a director owes a fiduciary duty to a shareholder and where the corporation is a trustee, to the beneficiaries of the trust: Hurley v BGH Nominees Pty Ltd (No.2) (1984) 37 SASR 499 at 510 per Walters J. In that case his Honour concluded that a breach of such a fiduciary duty entitled a shareholder to sue. The plaintiff relied upon this decision in support of the proposition that if a beneficiary might sue a director of the former trustee, so too, the new trustee who represents all of those beneficiaries. See, also Inge v Inge (1990) 3 ACSR 63 at 69-70 per O'Bryan J. These cases, as authority for such a proposition, have not escaped criticism. See R.I. Barrett casenote 59 ALJ 46; Cope v Butcher (1996) 20 ACSR 37; Australian Securities Commission v AS Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504 at 522, per Finn J. It may be, too, that the cases upon which Walters J and O'Bryan J relied would have limited the existence of such a duty to circumstances where the corporation was insolvent; Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1; Jeffree v NCSC (1989) 15 ACLR 217 at 222, per Wallace J or where the corporation was in deadlock or in its death throes: Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128 at 139, per Young J. It may be, too, that to impose upon a director the obligation to have regard to the interests of a class of persons, be they creditors, shareholders or beneficiaries, is not the equivalent of imposing upon that director a fiduciary duty actionable at the suit of any one member of that class. In my opinion, the preponderance of authority is against the right of a beneficiary, qua beneficiary, particularly a potential beneficiary under a discretionary trust, to sue, not the trustee for breach of trust, but a director of the trustee for breach of a directorial duty owed to that trustee. This is not to say that the circumstances of the particular case may not give rise to such a duty; the mere fact of the relationship between a trustee's director and a beneficiary of the trust does not.

At a glance

Court

Decision date

Before

Source

Judgment (103 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (6)