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[2026] NSWSC 585
Supreme Court of NSW
2026-05-18
Kunc J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Westpac Banking Corporation; Applications of Rightquip Pty Ltd (in liq) and Gleeson [2026] NSWSC 585
Hearing dates: 18 May 2026
Date of orders: 18 May 2026
Decision date: 18 May 2026
Jurisdiction: Equity - Expedition List
Before: Kunc J
Decision: Funds ordered to be paid out to trustee in bankruptcy
Catchwords: CIVIL PROCEDURE – Money paid into Court after registered mortgagee paid – Competing claims – No issue of principle
Cases Cited: National Australia Bank Ltd; Application of Avant Garde Investments Pty Ltd (rec apptd) (in liq) [2023] NSWSC 1153
Re Sirrah Pty Ltd, (In provisional liquidation) [2021] NSWSC 413; (2021) 152 ACSR 212
Category: Principal judgment
Parties: Rightquip Pty Ltd (In Liquidation) (First Claimant)
Triston Smith (Second Claimant)
Representation: Counsel: D Robertson (First Claimant)
M Meares (Second Claimant)
Solicitors: HFK Lawyers (First Claimant)
Kerrs (Second Claimant)
File Number(s): 2023/00051601
The Court has before it today competing motions making claims for the payment out of $164,961.31 paid into court by Westpac Banking Corporation, being the balance of the proceeds of sale of a property owned by Mr Triston Smith as his family home. Westpac had sold the property as mortgagee in possession upon default by Mr Smith.
The first claimant, for whom Mr D Robertson of Counsel appeared, is the liquidator of Rightquip Pty Ltd (In liquidation). Mr Smith was a director and, at the relevant time, 80% shareholder of Rightquip.
The second claimant, for whom Ms M Meares of Counsel appeared, is Mr Bruce Gleeson, who is Mr Smith's trustee in bankruptcy.
There was no dispute between the claimants that if the liquidator failed to satisfy the Court that the balance was subject to a constructive trust in favour of Rightquip, then the balance should be paid to the trustee. This was because, if it was subject to a constructive trust, it did not fall into Mr Smith's bankrupt estate.
For the reasons which follow, the Court has determined on the limited information available that the liquidator has not actually satisfied the Court on the balance of probabilities that the balance is held on a constructive trust for Rightquip.
There were two, cumulative reasons for this conclusion. First, the evidence relied on by the liquidator is insufficient to satisfy the Court that Mr Smith breached his fiduciary duty to Rightquip. Second, there is a not implausible explanation by Mr Smith before the Court which, while untested, is not one that can be dismissed out of hand.
There was no dispute about the relevant principles.
In National Australia Bank Ltd; Application of Avant Garde Investments Pty Ltd (rec apptd*) (in* liq*)* [2023] NSWSC 1153, McGrath J said:
- An applicant seeking payment out of court of funds under r 55.11 of the UCPR must satisfy the following four requirements, as articulated by Rees J in Council of the City of Sydney v Baboon Pty Limited [2020] NSWSC 1480 at [9]:
- identify the person who has the primary beneficial interest in the funds and the nature of their entitlement;
- identify any other persons beneficially interested in the funds and the nature of their respective entitlements;
- notify all potential fund claimants of the application; and
- have either a beneficial entitlement prior to the other interested parties or the consent of the other interested parties to the payment.
71 In circumstances where another potential claimant does not consent to the application, the applicant must prove that the alternative claimant does not have a valid claim against the fund, requiring strict proof and having regard to the court’s concern as to the risk of incorrect payments: see Re C & L Cameron Pty Limited [2012] NSWSC 676 per Ward J (as her Honour, the President, then was) at [122].
72 Her Honour continued in Cameron, noting at [128]:
In my view, what Rule 55.11 requires is a consideration of whether there are other competing claims and, if there are, then as Slattery J pointed out in Ruth Chong, it is a matter for the Court to determine their validity and the competing priorities between any valid claims. Thus, I do not accept that the present enquiry necessarily stops at the point at which an arguable claim has been established though it may, depending on the issue, be necessary or appropriate to defer a final determination of the validity of that claim to another forum. If the evidence before the Court is such that the validity of the claim can be determined on the very payment out application, then the statutory mandate for the just, quick and cheap resolution of the real issues in dispute would support the conclusion that a final determination as to that claim should then be made.
Noting Ward J’s (as her Honour then was) observation in Cameron, it is important to state at the outset that the Court has before it two competing notices of motion. This was not a contested inter partes hearing between Rightquip and Mr Smith about Mr Smith’s conduct and there was no suggestion that there would ever be such a hearing. In particular, while evidence of a written explanation of his conduct from Mr Smith was tendered, neither claimant called him to give evidence, so that evidence stands untested by cross-examination.
This meant that the present hearing was not a final determination of the claim as between Rightquip and Mr Smith about his conduct, but rather a hearing in which it fell to Rightquip, on all of the evidence, to bring the Court to a position of actual persuasion on the balance of probabilities that Mr Smith had breached his fiduciary duty to Rightquip by using its funds to purchase the property, thereby giving Rightquip the benefit of a constructive trust in its favour over the balance. The trustee contended, successfully, that the evidence as a whole was insufficient to sustain that conclusion.
The documentary evidence (including Mr Smith's explanation) is clear. $181,588.80 was paid out of Rightquip's account by two advances made on 3 and 5 December 2018 and paid into Mr Smith's personal account. On 5 December 2018, $180,003 was paid from Mr Smith's personal account and applied to the purchase of the property.
The liquidator submitted that the advances were in breach of Mr Smith's fiduciary duty to Rightquip, such that the balance was subject to a constructive trust in favour of Rightquip. As a high level statement of the law that submission is unimpeachable.
Rightquip's bank payment summary refers to the $151,588.80 payment on 3 December 2018 with the description of "Triston”. Rightquip's bank payment summary refers to the $30,000 transfer on 5 December 2018 as “TS loan”.
The documentary evidence also included a document generated on 19 December 2020 from Rightquip's accounting records described as "Account transactions [accrual] June 2015 to June 2020."
Under a heading "Triston loan" it records a number of debits (therefore advances to Mr Smith), including the 3 and 5 December 2018 advances. These are described in accordance with the bank payment summaries, again as, "Triston loan (P40.17)” for $151,588.80 and "Triston Smith" for the $30,000 advance.
Assuming in favour of Rightquip that the advances constituted a loan, the Court accepts Ms Meares' submission that, given that is the entire documentary evidence, Rightquip has not established a breach of fiduciary duty by Mr Smith in relation to the advances.
Both parties referred me to the decision of Black J in Re Sirrah Pty Ltd (In provisional liquidation) [2021] NSWSC 413; (2021) 152 ACSR 212, in which his Honour said:
120 The Plaintiffs then plead and the Defendants deny that WH preferred his own interests or the interests of HHC to Sirrah’s detriment and breached his statutory and fiduciary duties to Sirrah, and that Sirrah is entitled to equitable compensation, compensation under s 1317H of the Act, or to an account in respect of those matters (FASOC [49]). The alleged breaches are again particularised, rather than pleaded as they should have been, as breach of s 180-182 of the Corporations Act and breach of the no conflict rule and no profit rules giving rise to a breach of fiduciary duty. The Plaintiffs again seek equitable compensation and compensation under s 1317H of the Act or an order for an account and the Defendants deny their entitlement to such relief. The Defendants pleaded a limitation point in respect of any loss or damage which accrued on or before 14 November 2012 or alternatively before 18 December 2011 (AD [51]-[53]). It is not apparent that any loss claimed falls within the earlier period to which a limitations defence could attach.
121 Mr Fernon submits, uncontroversially, that the making of loans to a director for personal purposes does not of itself constitute improper conduct by the director or a breach of his statutory or fiduciary duties. He refers to Hamilton J’s observation in Kalls Enterprises Pty Ltd (In liq*) v* Baloglow (2006) 58 ACSR 63; [2006] NSWSC 617 at [60], to which reference was made without disapproval by the Court of Appeal in Kalls Enterprises Pty Ltd (in Liq*) v* Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191 at [88], that:
“I bear in mind in assessing the relevant material that it is not uncommon for proprietary companies to pay sums, sometimes large sums, on behalf of directors or to advance to directors funds to meet private obligations or for private purposes. This is illustrated by the facts in Hancock. Occasionally, the taking of these sums constitutes bald misappropriation of company funds by a director. But generally the takings are part of perfectly proper transactions under which the funds are debited to the director’s loan account with the company, or there are other arrangements between the company and the director for the due repayment of these funds to the company.”
…
128 I am not persuaded that the pleaded claim for breach of the duty of care and diligence is established in respect of the loan to WH, which was documented by a loan agreement (albeit Sirrah had not executed it) and secured by the security agreement, albeit that security had the difficulty under s 259B of the Act to which I referred above and was not registered under the PPSA. The latter difficulty could still be rectified by an application by Sirrah for an extension of time to register it, at least prior to any bankruptcy of WH. I am satisfied that the pleaded claim for breach of the duty of care and diligence is established in respect of the loan to HHC. It seems to me that the loan to HHC was at least made in breach of WH’s duty of care and diligence where there was no loan agreement for that loan, no agreed interest obligation or repayment date, no identified events of default to which the security could apply, and the significance of those deficiencies was exacerbated by the substantial size of the loan and the extent to which it increased over time, and by the reallocation of a debt previously owed by WH to HHC despite those deficiencies.
In my respectful opinion, the difficulty for the liquidator is that the documentary evidence referred to in [11] to [15] above is all he has. As is apparent from the passages to which I have referred in Sirrah, in and of itself a personal loan to a director is not, without more, a breach of that director's fiduciary duty. The difficulty for the liquidator in this case is that to get any further, he has to prove a negative.
Whilst it was submitted by Mr Robertson, for example, that there was no loan agreement, or no board approval for the advances, there was in fact no evidence from which the Court could infer that to be the case. I accept it may not be straightforward. However, for example, no effort was made in the liquidator's evidence to prove what documentary records, by way of minutes and other matters, had been available to the liquidator which, upon search, had not disclosed any of the matters that might be relevant.
It is no answer for the liquidator to say that the liquidator had unsuccessfully sought production of the company’s records. The evidence before the Court on that question suggested that there was difficulties about inspection during the period of COVID, but even if the Court were to draw the inference that there were no such records, in my view that would be insufficient for the Court to be satisfied, in the circumstances of this case, that there was no loan agreement or no approval.
The difficulty for the liquidator is one of proof. There is just no evidence one way or the other. A lack of production by Rightquip’s former solicitors of documents apparently sought from Rightquip's records is not of sufficient assistance to the liquidator to bridge the evidentiary gap. I consider it to be too great a leap for the Court to conclude, solely on the basis of the facts which have been proved, and in the absence of the records sought from the solicitors, that there was a breach of fiduciary duty on the part of Mr Smith. There may well have been. On the evidence tendered in these proceedings, the Court is unable to reach that conclusion.
The conclusion that I have just expressed does not just depend on what the liquidator has or has not proven. There is a second reason why I am not actually satisfied of any breach of duty on the part of Mr Smith. That is because of the Court has before it three pieces of evidence from Mr Smith.
First, there is a file note from an employee of the liquidator dated 19 November 2020, which records:
“Director Loan Account
My review of the Company's MYOB management accounts Indicate an outstanding director loan account totalling $278,149 as at the date of the Liquidator's appointment.
I have obtained copies of the Company's pre-appointment bank statements and was able to match payments totalling $277,548.80 made to or on behalf of the Director from the Company's bank accounts. The balance of $600 appears to have been debited from a related entity's bank account, Right Services Pty Ltd.
I have spoken to the Director regarding particulars of this loan account and have been advised that a portion of the loan was utilised for the purchase of the Director's real property. The Director further indicated that he had previously provided a loan to the Company in the sum of approximately $200,000 which had not been reflected in the Company's management account and would reduce the director loan account if this was applied. I subsequently requested evidentiary documentation to substantiate the Director's claim and am currently awaiting receipt of this documentation. l note that any amounts previously contributed by the Director would require documentation such as a loan agreement to categorise amounts as being loans as opposed to capital injections to the Company.
In the absence of further documentation, a formal demand for repayment was issued to the Director on 18 November 2020 for $278,149 in respect to the outstanding director loan account. This matter is ongoing.”
The second piece of evidence is an email from Mr Smith to an employee of the trustee on 25 May 2021 in which Mr Smith states: “I have included a spread sheet which details the payments amounts and have made notes regarding each payment as well as provided a summary”.
There is an attached spreadsheet with three sections on it. The first is headed "Triston Smith RQ loan account outgoings" which includes the payments of 3 and 5 December 2018.
The second is "Triston Smith personal account outgoing," which records the withdrawal on 5 December 2018, of the $180,003.00, with the entry "Payment for house deposit."
It is the third section which is of some importance for present purposes. This is headed "Triston Smith RQ loan account." It has two entries.
The first is dated 10 November 2014 with the reference "Loan to RQ" of $85,000. The comment is "Payment transferred into RQ account by Ben Hitchon on behalf of Triston." It then states "Refer to Rightquip bank statements; don't have access to this statement”.
The second entry is dated 30 January 2015. The reference is "Loan to RQ" and the amount is $120,000. It is described as "Payment transferred into RQ account by Tristons parents on behalf of Triston," and refers to a bank remittance.
Attached is an email of 8 January 2015 from Mr Smith to a Mr Grahame Smith, addressed as "Hey, dad," and provides business bank details headed "Triston Smith director's loan." There is then attached to that a telegraphic transfer from Mr Grahame Smith to Rightquip of $120,000.
This evidence assumes importance in my consideration because it provides some corroboration of Mr Smith's statements that he had, in fact, lent money to Rightquip, of which the advances applied towards the payment of his house deposit were a repayment.
Had there only been statements by Mr Smith I had would have given them little weight. But, for present purposes, they are given some contemporaneous documentary support by the evidence to which I have referred in [30] and [31] above.
That is then consistent with the third piece of evidence which was before the Court, which was an email from Mr Smith to an employee of the liquidator on 6 March 2026.
“Thanks for your time on the phone earlier today.
As per our discussion and after reviewing the records I have, I can confirm that the amounts paid to me on the dates below were payments made to me from Rightquip.
These payments were made by Ana Frketic the Joint Director & CFO of Rightquip and were paid to me as loan paybacks.
These payments were made to me to facilitate the purchase of my house at 10 Governors Drive in Lapstone which settled on the 6th December 2018.
I can also confirm that a bank cheque that was drawn on the 5/12/2018 from my personal westpac account was given to my solicitor at the time of settlement.
RightQuip Payments to Me (Loan Paybacks)
3/12/2018 - $151,588.80
5/12/2018 - $30,000.00
Bank cheque drawn from my personal account
5/12/2018 - $180,003.00”
It will be noted that in that email Mr Smith says that the money was "paid to me as loan paybacks". There is at least some evidence that there were such loans to Rightquip.
As I have observed earlier in these reasons, this was not an inter partes dispute between Rightquip and Mr Smith where the Court has the full gamut of evidence that might be expected in a dispute about the nature of the advances the subject of the present claim. Neither claimant sought to call Mr Smith to give evidence. The evidence that the Court has of his position is therefore untested. That does not necessarily mean that it is to be accepted. Nevertheless for present purposes it is not implausible, given that there is at least some independent verification of the loan apparently advanced on behalf of Mr Smith to Rightquip by his father. The Court therefore does not dismiss Mr Smith's evidence out of hand but takes it into account in considering whether the liquidator has discharged his onus of proof.
The difficulty for the liquidator is that Mr Smith’s evidence, such as it is, both falsifies the notion that the advances were in fact loans rather than repayments of loans, and suggests that they have a different character entirely. The Court is not able to come to a concluded answer on the question but that is sufficient to demonstrate that the liquidator has failed on the balance of probabilities to bring about in the Court a state of actual satisfaction that the advances were a loan and that the loan was in breach of fiduciary duty.
For these reasons the Court will order the payment out of the balance to the trustee, that being the agreed position of the parties if the liquidator was unable to establish his case.
The parties ran their dispute over the balance as contested litigation between them. Ms Meares submitted that costs should follow the event such that the liquidator should pay the trustee’s costs of the liquidator’s motion. The trustee would recover the costs of his own motion as a cost and expense in Mr Smith’s bankruptcy.
Mr Robertson submitted that his client should not have to pay the trustee's costs of the liquidator's motion because a significant piece of evidence, being the email set out in [33] above, had only emerged at today's hearing. There was no explanation by the trustee for the late production of, or reliance upon, that email. Mr Robertson submitted that the email was a significant factor in the Court's decision.
Ms Meares submitted that even allowing for the late appearance of that email, the liquidator had been on notice of Mr Smith's contentions about the nature of the advances for some years. She properly accepted, nevertheless, that this latest evidence was independent or contemporaneous evidence supporting, at least in part, what Mr Smith had apparently been saying to the liquidator for some time. She submitted that there should be no departure from the principle that costs follow the event in relation to the liquidator’s motion .
The Court accepts Mr Robertson's submission that the two reasons given by the Court today were interlinked. It may well be that the first reason which I have given would still have led to the same result. Nevertheless, the Court was fortified in the conclusion which it reached by this late evidence.
In those circumstances, the just result is that the liquidator should personally pay the trustee's costs of the liquidator's motion excluding the trustee’s costs of today.
The orders of the Court are:
Pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW), the Court directs that the sum of $164,961.31 be paid out of Court by the applicant to Mr Bruce Gleeson as trustee of the bankrupt estate of Triston Smith.
The Court directs any interest earned on the money paid into Court in these proceedings to be paid to Mr Gleeson.
The Court dismisses the motion dated 16 February 2026 filed by Rightquip Pty Ltd (In liquidation).
The Court orders that the liquidator of Rightquip Pty Ltd (In liquidation) personally pay Mr Gleeson's costs of Rightquip's motion other than the costs of today.
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