Equity - Recipient liability - First limb of **_Barnes v Addy_** - Whether defendants had sufficient knowledge of breach of trust - [2008] WASC 21 - WASC 2008 case summary — Zoe

Parties

Applicant/Plaintiff:

Equity - Recipient liability - First limb of **_Barnes

Respondent/Defendant:

Addy_** - Whether defendants had sufficient knowledge of breach of trust

Legislation Cited (3)

Trading Act 1987

Tax Assessment Act 1936

Tax Assessment Act 1997

Cases Cited (39)

CORPORATE SYSTEMS PUBLISHING PTY LTD -v- LINGARD [No 4] [2008] WASC 21 (28 February 2008)

175 In Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 273 [11] McHugh ACJ, Gummow and Hayne JJ restated the following principles of statutory interpretation, by reference to earlier authorities:

In Newcastle City Council v GIO General Ltd [(1997) [1997] HCA 53; 191 CLR 85, 112], McHugh J observed:

176 A statutory provision should be construed, so far as possible, consistently with the language and evident purpose of all of the provisions of the statute: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69], [78].

193 One of the primary duties of a trustee is to obey the terms of the trust: Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [32]; Jacobs [1704]; Ford and Lee [9050].

251 The primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument: Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 - 110; Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109, 119.

252 The interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11].

253 The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; Toll (FGCR) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 [8], [53].

254 An instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience: Zhu v Treasurer (New South Wales) [2004] HCA 56; (2004) 218 CLR 530 [82]; Maggbury Pty Ltd v Hafele Australia Pty Ltd [43]. However, as Gleeson CJ, Gummow and Hayne JJ observed in Maggbury [43], what in respect of a particular contract comprises 'business commonsense', as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible.

255 There has been substantial recent judicial discussion of the question of whether ambiguity must be established before evidence of surrounding circumstances is admissible upon the construction of a written contract. The Full Federal Court has held that there is no requirement of ambiguity: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1. The position in Western Australia has not been authoritatively determined; see, for example, Home Building Society Ltd v Pourzand [2005] WASCA 242 [25] - [33]; Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117 [154].

257 Evidence of prior negotiations is, in the context of construction of an instrument, admissible for some purposes but not for others. The position was explained by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 352, in a passage recently applied by McLure JA (with whom Wheeler JA agreed) in Chemeq Ltd v Shepherd Investments International Ltd [155] - [156]. Insofar as such evidence establishes objective background facts known to the parties, or the genesis, purpose or object of the transaction, it is admissible. Insofar as the evidence consists of statements and actions of the parties reflective of their actual intentions and expectations, such evidence is inadmissible. Such statements reveal the terms of the contracts which the parties intended or hoped to make. They are superseded by or merged in the contract. Evidence of prior oral agreement or 'preliminary consensus' (Codelfa, 354) of the parties is inadmissible in the context of a question of construction.

259 On the balance of authority, subsequent conduct is not relevant or admissible in aid of the construction of a contract, see for example, Posgold (Big Bell) Pty Ltd v Placer (WA) Pty Ltd [1999] WASCA 217; (1999) 21 WAR 350, [50] - [51]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [26]. For that reason I would reject the tender by the plaintiff of MFI 18, a stamp duty document lodgement and assessment form prepared by the defendants' solicitors in 2005 in respect of the stamping of the January 2002 Agreement. For the same reason, the question of whether beneficial ownership of the shares in E Genius (held by Corporate Systems on behalf of Messrs Christou, Joyce and Lingard) was transferred to Corporate Systems (or Mr Christou) after the January 2002 Agreement, to which some attention was given in cross-examination and submissions, is not of assistance in construing the agreement.

(2004) 218 CLR 273

(1998) 194 CLR 355

(2003) 212 CLR 484

(1992) 26 NSWLR 666

(1973) 129 CLR 99

(1992) 10 WAR 109

(2001) 210 CLR 181

(2004) 218 CLR 451

(2004) 219 CLR 165

(2004) 218 CLR 530

(2006) 156 FCR 1

(1982) 149 CLR 337

(1999) 21 WAR 350

(2001) 53 NSWLR 153

(1992) 26 NSWLR 170

(2007) 34 WAR 255

(1993) 41 FCR 559

(1931) 45 CLR 359

(1989) 168 CLR 385

(2007) 81 ALJR 1107

(1938) 60 CLR 336

(1999) 151 FLR 191

(2003) 28 WAR 139

(1992) 37 FCR 390

(1994) 34 NSWLR 148

(1995) 132 ALR 514

(2006) 229 CLR 386

Equity - Recipient liability - First limb of _Barnes v Addy_ - Whether defendants had sufficient knowledge of breach of trust

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (204 paragraphs)

The knowledge of Messrs Lingard and Joyce and of Demandem and Glenlea

Conclusion on claims against the beneficiary defendants

Parties

Legislation Cited (3)

Cases Cited (39)

CORPORATE SYSTEMS PUBLISHING PTY LTD -v- LINGARD [No 4] [2008] WASC 21 (28 February 2008)