Nuthall v Nuthall [2001] NSWSC 950 | Case summary

Judgment 1 His Honour: This is a rather odd set of proceedings between two brothers in connection with a company known as Timberland Forests Pty Limited. 2 At all material times, at least between 1974 and 1996 the defendant held seventy-five A-class shares in the company, which I will call "Timberland". There is no doubt that eighteen and three-quarters of those shares were held on trust for the plaintiff, and, indeed, that is admitted on the pleadings. 3 Timberland appears to be a company which was involved in the primary production of softwood timber, the growing of trees, administering investments in timber and dealings with the land involved. Some of the documents dealing with the work of the company are set out in annexure B to the defendant's affidavit. 4 The defendant was at all material times a director of the company, and he also was involved in doing work for the company. 5 Timberland appears to have had, as one would expect this type of company to have, uneven profitability. The only Timberland documents that I have in evidence are in Exhibit PXO1, being the accounts for the years ended 31 March 1986 to 31 March 1989, which are a little hard to follow. However it is clear that, particularly in the last two years, large sums of money were paid out to the defendant by way of management fees or commissions. The payment of these moneys had, of course, the effect that there was less money available for the payment of any dividends. 6 The plaintiff considers that the defendant has received almost $1,000,000 from the company by way of "distributions" and he considers that as a one-quarter beneficiary in the trust constituted by the holding of the shares in Timberland he is entitled to a distribution of one-quarter of that sum. He has in fact received some moneys as on page GN32 of his affidavit, some $75,000 in 1986 to 1988, but he says that compared with the amounts paid to his other brothers, who are not parties to these proceedings, and particularly compared to the moneys received by the defendant, that sum was nowhere near a fair share. 7 The plaintiff's amended statement of claim is in fairly specific terms. Under the heading "Breach of Trust" the plaintiff claims that the defendant has: "… failed to fully and properly account to the plaintiff for the plaintiff's one quarter beneficial share in distributions received by the Defendant as Trustee ." 8 There is then a heading "Breach of Duty" in which it is said that the defendant as a trustee was at all material times under a duty to pay and transfer the trust property and any income earned thereon to the beneficiaries and the defendant retained an excessive share of the distributions received by him as trustee and had not properly and fully accounted to the beneficiaries; that the defendant was under a duty not to profit by the trust or otherwise deal with the trust property for his own benefit, but he had retained an excessive share of distributions and had not fully and properly accounted to the beneficiaries. There are also counts under the heading "Estoppel" based on certain representations and under the Fair Trading Act 1987. However, there is just insufficient evidence of the elements to make out any of the latter two causes of action so one is confined to breach of trust. 9 The present area is a very technical one in many respects. There is a distinction between a breach of trust and a breach of fiduciary duty. This distinction is well made in Bristol and West Building Society v Mothew [1998] Ch 1, 17. There is also a clear distinction between a breach of fiduciary duty as a trustee and a breach of a fiduciary duty as a director: see Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 484 and following. 10 It may have been possible to frame the present case as a case of breach of fiduciary duty by the defendant in his joint activity as a director and trustee, or his joint activity as a trustee and employee, or in dealing with Timberland on his own behalf whilst he was a trustee, in diverting moneys which were otherwise available for dividends to his own use. That is a fiduciary duty that has been made out every so often over the last 175 years; see for instance Walsham v Stainton (1863) 1 DeG J & S 678; 46 ER 268 and Kizquari Pty Limited v Prestoo Pty Limited (1993) 11 ACLC 569, 571-2. Further, that was not the case that was advanced in the statement of claim. Had it been advanced it would have been necessary to consider the evidence as to whether there was an improper distribution and what exactly were the arrangements between the defendant and the company. There was no evidence of this, presumably because the defendant did not consider that it had anything to do with the case. 11 Nor was the case one of breach of fiduciary duty as a director. Mr Finch, for the plaintiff, distinctly denied such a case. Even if one had been made there would have been great difficulty with it as to the standing of the plaintiff to make the claim. 12 Accordingly, the claim was one for breach of trust in respect of moneys that were actually received by the defendant as trustee. 13 There is no doubt at all that large sums of money were received by the defendant from the company, and it may be that some of those moneys were over payment in respect of work done, but there is also no doubt that they were paid lawfully with the consent of the company and were paid as management fees or commission. As such they were not received by the defendant as trustee. The only possible exception is dividends which were credited to the defendant's loan account in 1984-1985 totalling $825. 14 Accordingly, even apart from the Statute of Limitations, this claim must fail. 15 The defendant also pleads s 48 of the Limitation Act 1969. That section provides: "An action on a cause of action in respect of a breach of trust is not maintainable if brought after the expiration of the only or later to expire of such of the following periods of limitation as are applicable - (a) a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom he claims; and (b) the limitation period for the cause of action fixed by or under any provision of this Act other than this section." 16 Mr Sirtes for the defendant says this case falls squarely within s 48. Mr Finch, on the other hand, says that the limitation period only runs from the time when the beneficiary reasonably knew about the breach, or upon the final act of the breach of trust, which he said occurred only in 1996. 17 The proceedings were commenced on 29 September 1998 so that the limitation period cuts out any action commenced on or before 29 September 1992. 18 The expression "cause of action" in this context is well defined by Lord Esher MR in Coburn v Colledge [1897] 1 QB 702, 706-7, that is that the cause of action accrues at the time when every fact occurred which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to judgment of the Court. There is not, as there is in s 47, any reference to a person first discovering that the cause of action was complete. 19 The claim in MIO3 shows that the last of the moneys were received by the defendant and not accounted to the plaintiff in March 1989, and MIO4 shows 11 October 1989. In any event, these are more than six years ago. 20 There is a question as to whether s 48 applies to counts in equity for breach of fiduciary duty. There is a respectable argument to say that it does not, but rather equity applies and I refer to the discussion in Lewin on Trusts, 17th ed (Sweet and Maxwell, London, 2000) p 1393 par 44-30 and AG v Cocke [1988] Ch 414, 421; see also Re Flavelle [1969] 1 NSWR 361, 366. However, the present case is not one for breach of fiduciary duty, it is for breach of trust and is an action within s 11(1) of the Limitation Act 1969 and accordingly, in my view, s 48 applies and is a complete answer to the action. 21 During final addresses Mr Finch sought to amend to insert a new paragraph in the statement of claim, viz 3A: "The defendant has converted trust property received by him while a trustee to his own use." 22 Particulars were then given of 25 per cent of certain payments received between 27 July 1983 and 11 October 1989. 23 This was an attempt to get the case within s 47(1)(b) of the Limitation Act which provides that no action is maintainable by a trustee or a beneficiary if caught after the expiration of twelve years from the date on which the plaintiff ought reasonably to have discovered the facts giving rise to the cause of action. 24 It is clear, so far as s 47 is concerned, that unless this is properly pleaded it is not a matter that can be relied on: see Banque Commerciale SA v Akhill Holdings Ltd (1990) 169 CLR 279, 285-6. 25 There is no substantial material to show when the plaintiff became aware of the facts. The defendant did receive one payment within the twelve year period on 3 October 1989. Accordingly, even if the amendment were made it would only go to the last payment. 26 Mr Sirtes opposed the amendment on the basis that it was futile and on the basis that the pleading would in any event be defective because it did not give particulars of the conversion nor did it indicate that the moneys were received because the defendant was a trustee. He also indicated that if the amendment were allowed he would need to call further evidence. He pointed out that the amendment was only made in the final addresses. 27 In my view the amendment is defective; it is probably futile even if I were wrong on the merits, and I do not consider that in my discretion I should allow it. However, it has been marked MIO4 in case this matter should go elsewhere. 28 The case seems to have been approached by the plaintiff that somehow or other he had a right to twenty-five per cent of the moneys received by the defendant by way almost of an award of liquidated damages by the Court. The most that the plaintiff could have got on the material would have been an inquiry before a Master as to what moneys ought to have been received by the defendant as trustee and for an account. Even in that situation, there would be some doubt as to whether the other beneficiaries, namely the other two brothers, should have been parties to the suit because they also received some distributions and apparently are not complaining of the way in which the trust was administered. However, as the suit was limited to the moneys which were actually received, and actually received as trustee, the plaintiff does not get to this stage. 29 Accordingly, whilst I can sympathise with the plaintiff's feeling that he has been badly done by, the suit as pleaded does not give any current claim for relief. 30 It follows that the proceedings must be dismissed with costs.

Nuthall v Nuthall

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