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Loss of Investment Sought by Plaintiff from Defendant
Gilmore Finance seeks loss of their investment from the defendant. The defendant asserts that the defendant trustees through their director and alleged agent made representations concerning the level of investment of other parties. The Court, in adjudicating this dispute, relied upon the Competition and Consumer Act 2010 (Cth).
Facts:
Between February 2011 and August 2012, the plaintiff, Gilmore Finance Pty Ltd, invested some $7.69 million in development projects relating to two pieces of land purchased by the first and second defendants (“A1” and “A3”) in Western Sydney. The first piece of land was a petrol station site at 198 Great Western Highway, Kingswood which was purchased by A1 in April 2010 for $2 million (the “Kingswood Land”). The second was land adjacent to the Nepean Hospital which was purchased by A3 in August 2012 for $7.7 million (the “Hospital Land”). “Kingswood Trust” and the “Hospital Trust” were established for the purpose of the development of the two properties by construction of multi-storey commercial and residential buildings. Ultimately, neither development proceeded. The properties have now been sold.
The sole director of A1 and A3 is the third defendant, Mr Farshad Amirbeaggi. Mr Amirbeaggi is a solicitor and the principal of the firm Yates Beaggi. The decisions of Gilmore Finance to invest were made by its director, Mr Lyle Gilmore. Through other companies, Mr Gilmore had engaged in various activities associated with the mining industry.
The fourth and fifth defendants, Ms Vashti Conway and Ms Kate Yates held units in the Kingswood and Hospital Trusts. They are the wives of Mr Amirbeaggi and Mr Amirbeaggi’s then business partner, Mr Brenton Yates. Gilmore Finance alleges it made its investments as a result of representations, said to be misleading or deceptive made to Mr Gilmore by Mr Amirbeaggi, as director of A1 and A3. Gilmore Finance alleges some of those representations were made by Mr Amirbeaggi himself, and others on his behalf by Mr Christopher Wayman, Mr Graham Armstrong and Mr Adam Hollioake.
The proposed development of the Kingswood Land and the Hospital Land did not proceed. A3 sold the Hospital Land in January 2018 for $18 million and paid Gilmore Finance $4 million from the proceeds. A1 sold the Kingswood Land in June 2020 for $3.54 million. No monies were paid from the proceeds to unitholders, although A1 had earlier repaid Gilmore Finance some $215,000.Gilmore Finance claims it has lost the balance of its investment, some $3.5 million, and seeks to recover that loss in these proceedings.
Issues:
I. Whether or not unit-holders failed to make the required contributions.
II. Whether or not the units had been issued at a discount.
III. Whether or not the transactions were entered without authority.
IV. Whether or not proper accounting records were maintained.
V. Whether or not the trustees should be removed.
Applicable law:
Competition and Consumer Act 2010 (Cth) - provides that a trustee lending money on the security of any property on which the trustee can lawfully lend shall not be chargeable with breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made, provided that the loan was made in accordance with this section.
Trade Practices Act 1974 (Cth) - provides that a person who suffers loss or damage by an act of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person.
Trustee Act 1925 (NSW) - provides that the Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 - provides that where there may be multiple causes of a plaintiff’s loss or damage, the plaintiff may succeed if it establishes that the defendant’s impugned conduct “materially contributed” to the loss or damage suffered.
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 - provides that the common law concept of causation recognises that conduct that infringes a legal norm may be causally connected with the sustaining of loss or damage even though other factors may have contributed to the loss or damage.
Juul v Northey [2010] NSWCA 211 - provides that the Court has an inherent jurisdiction to remove a trustee where the Court considers that the continuance of the trustee in the trust will prevent its proper execution.
Analysis:
Gilmore Finance claimed that the unit price ascribed by A3 to the units acquired by Ms Conway and Ms Yates on 9 August 2012 “was at a significant discount to the unit price ascribed by” A3 to the units acquired at that time by Gilmore Finance, and that by reason of A3 granting Ms Conway and Ms Yates such “Unit Price Discount”, A3 breached its fiduciary duties to Gilmore Finance. However, the unit allotments were part of a series of transactions to which Gilmore Finance, with the benefit of advice from Mr Coates, agreed to as a means by which to fund completion of the purchase by A3 of the Hospital Land and to increase Gilmore Finance’s investment in the Hospital Trust to an equal one-third investment with interests associated with Mr Amirbeaggi and Mr Yates; namely the unitholdings of Ms Conway and Ms Yates. No submission was proffered as to why the relevant accounts did not present a true and fair view of the financial position of the two trusts. Absence of Gilmore Finance’s loan of $2.25 million was equalised by the absence of any receivable for the monies due under the Hospital Trust Unit Subscription Payment Agreement.
Gilmore Finance’s submissions concerning the removal of A1 focused on the complaints it made about the delay in the preparation of the trust’s accounts for F13 to F17. Gilmore Finance did not develop any separate submissions in relation to the position of A3 as trustee of the Hospital Trust. Gilmore Finance has not demonstrated any conduct on the part of either A1 or A3 such as would warrant their removal as trustee. The Kingswood Trust and the Hospital Trust were established for the specific purpose of pursuing identified property developments, neither of which is now proceeding. On behalf of A1 and A3, it was submitted that none of the trusts was in possession of any assets, “save for adverse costs orders against Gilmore Finance”.
Conclusion:
Gilmore Finance has failed to establish that Mr Amirbeaggi, as director of A1 and A3, made any of the representations alleged in the List Statement save, perhaps, the “Subscription Representation”, and has, in any event, failed to establish that it was misled by any of the representations alleged. Gilmore Finance has failed to establish that it has suffered any loss “because of” any representation allegedly made by Mr Amirbeaggi on behalf of A1 or A3. The Court dismissed the proceedings with costs. Gilmore Finance has failed to make out any of its claims.
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